Page 1

♦Contents♦ ♦Annual Report 2007♦

Contents

Page Corporate Information

2

Chairman’s Statement

5

Corporate Governance Report

7

Shareholders Structure

17

Committees and Management Structure

19

Market and Business Conditions

37

Risk Factors

41

Audit Committee’s Report

46

Financial Performance and Financial Information

48

Report regarding the Responsibility of The Board of Directors for Financial Reports Auditor’s Report and Financial Statements

KIM ENG SECURITIES (THAILAND) PLC

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♦Corporate Information♦ ♦Annual Report 2007♦ Honorary Chairperson Mrs. Gloria Lee Kim Yew The Board of Directors 1. Mr. Yuth Vorachattarn 2. Mr. Ronald Anthony Ooi Thean Yat 3. Mr. Montree Sornpaisarn 4. Mr. Judd Clark Kinne 5. Mr. Wei Cherng Hwang 6. Mr. Pusit Kaewmongkolsri 7. Ms. Chao Tse Yang

Auditor PricewaterhouseCoopers ABAS Limited 1. Mrs. Aunakorn Phreutithada Certified Public Accountant, Registration No.3257 2. Mr. Kajornkiet Aroonpirodkul Certified Public Accountant, Registration No.3445 3. Mr. Boonmee Ngodngamwong Certified Public Accountant, Registration No.3673 Fl.15th. Bangkok City Tower 179/74-80 South Sathorn Rd. Silom, Bangrak Bangkok 10120

8. Dr. Preecha Jarungidanan 9. Dr. Paiboon Sareewiwatthana

Tel : Fax :

66 (0) 2286 9999 66 (0) 2344 1000 66 (0) 2286 5050

Ngamwongwan Branch 30/39-50 Fl.14th The Mall Ngamwongwan Office Tower Ngamwongwan Rd. Bangkhen Nontaburi 11000 Tel : 0-2550-0577 Fax : 0-2550-0566 Srinakarin Branch 1145 Moo 5 Fl.3rd Akepailin Tower Srinakarin Rd. North Samrong Samutprakarn 10270 Tel : 0-2758-7003 Fax : 0-2758-7248 Yada Branch 56 Yada Tower Fl.5th Silom Rd. Suriyawong Bangrak Bangkok 10500

Corporate Secretary Company Offices Mr. Waranchai Jensiriwanich • Head Office 999/9 The Offices at Central world, Fl.20th-21st, Rama 1 Road, Patumwan, Patumwan, Bangkok 10330 Tel: 66(0)2658 6300 Fax: 66(0)2658 6301

Company Registration No. Bor Mor Jor 0107545000314 Homepage www.kimeng.co.th Securities Registration Thailand Securities Depository (Thailand) Co., Ltd. 62 The Stock Exchange of Thailand Building, Rachadapisek Road, Klongtoey, Bangkok 10110 Tel: 66 (0) 2359 1200

Tel : 0-2632-8341 Fax : 0-2632-8395

Bangkok and Vicinities

Head Office 999/9 The Offices at Central World, Fl.20th-21st, Rama 1 Road, Patumwan, Patumwan, Bangkok 10330 Tel: 66(0)2658 6300 Fax: 66(0)2658 6301 Phahurad Branch 125, 125/1-6, 125/19-25 The Old Siam Plaza Tower Fl.3rd Pahurad Rd. Wangburapapirom, Pranakorn, Bangkok 10200 Tel : 0-2225-0242 Fax : 0-2225-0523 Ladpraw Branch 1693 Central Ladpraw Tower Fl.9th 905/1 Phaholyothin Rd. Ladpraw Jatujak Bangkok 10230

The Emporium Branch 622 The Emporium Tower Fl.14th Sukumvit Rd. Klongtun Klongtoey Bangkok 10110 Tel : 0-2664-9800 Fax : 0-2664-9811 Thapra Branch 99 Fl.13 The Mall Thapra Office Tower Ratchadapisek-Thapra Rd. Bukkaloe Thonburi Bangkok 10600 Tel : 0-2876-6500 Fax : 0-2876-6531 Asoke Branch 159 Sermmit Tower Fl.25th Soi Sukumvit 21 Asoke Rd. North Klongtoey Wattana Bangkok 10110 Tel : 0-2665-7000 Fax : 0-2665-7050

Tel : 0-2541-1411 Fax : 0-2541-1108

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♦Corporate Information♦ ♦Annual Report 2007♦ Seacon Square Branch 55 Seacon Square Tower Fl.G Room 1005 Srinakarin Rd. Nongbon Pravej Bangkok 10260

Sathorn Nakorn Branch 100/46 Sathorn Nakorn Tower Fl.24C North Sathorn Rd. Silom Bangrak Bangkok 10500

Tel : 0-2320-3600 Fax : 0-2320-3610

Tel : 0-2636-7550 Fax : 0-2636-7565

Future Park Rangsit Branch 94 Future Park Rangsit Tower Fl. GF Phaholyothin Rd. Prachatipat Pathumthani 12130

Town In Town Branch 1201/114 Ladphrao 94 Rd. (Panjamit) Wangthonglang Bangkok 10310

Tel : 0-2958-0591 Fax : 0-2958-0590

Tel : 0-2935-6111 Fax : 0-2935-6070

Platinum Branch 222/1339-1344 Platinum Fashion Mall, 6th FL., Petchburi Rd., Ratchathavee, Bangkok 10400 Tel. : 0-2121-9464 Fax : 0-2121-9466 Fortune Branch 5 Fortune Town Tower, Basement Fl., Ratchadapisak Rd., Dindang, Bangkok 10400 Tel. : 0-2641-0977 Fax : 0-2641-0966 •

Other Provinces

Thaniya Branch 52 Thaniya Plaza Tower Fl. 20 Silom Rd. Suriyawong Bangrak Bangkok 10500

Fashion Island Branch 5/5-6 Moo 7 Fashion Island Shopping Center Fl.BF, Ramintra Rd., Kannayao Bangkok 10230

Tel : 0-2231-2700 Fax : 0-2231-2130

Tel : 0-2947-5800-5 Fax : 0-2519-5040

Bangkae Branch 275 Moo 1 Fl.8 The Mall Bangkae Tower Petchkasem Rd. North Bangkae Bangkae Bangkok 10160

RCA Branch 45/1 Rama 9 Rd., Soi Soonvijai, Bangkapi, Huay Kwang, Bangkok 10320

Nakon Ratchasima 2 Branch 1242/2 The Mall Office Tower Fl. 7th Room 3 A Mittrapap Rd. Nai Maung, Maung Nakonratchasima 30000

Tel. : 0-2203-1800 Fax : 0-2203-1809

Tel : 044-288-455 Fax : 044-288-466

Silom Branch Thaniya Building 4th Floor, Silom Rd,Suriyawong, Bangrak, Bangkok 10500

Surin Branch 137/5-6 Sirirat Rd. Nai Maung Maung Surin 32000

Tel : 0-2804-4232 Fax : 0-2804-4251 Yaowaraj Branch 215 Grand China Tower Fl.4th Yaowaraj Rd. Samphantawong Bangkok 10100 Tel : 0-2622-9412 Fax : 0-2622-9383 Pinklao Branch 7/129 Central Pinklao Tower Fl.3rd Room 302 Baromratchonni Rd. Arunamarin Bangkok Noi Bangkok 10700

Tel. : 0-2231-2700 Fax : 0-2231-2418 Chidlom Branch 540 Mercury Tower. 17th FL. Ploenchit Rd., Lumpinee, Pathumwan, Bangkok 10330 Tel. : 0-2658-5890 Fax : 0-2658-5896

Nakon Ratchasima 1 Branch 14 Manas Rd. Nai Maung Maung, Nakon Ratchasima 30000 Tel : 044-269-400 Fax : 044-269-410

Tel : 044-531-600-3 Fax : 044-519-378 Ubon Ratchathani Branch 191, 193 Aupparaj Rd. Nai Maung, Maung Ubon Ratchathani 34000 Tel : 045-265-631-8 Fax : 045-265-639

Tel : 0-2884-9847 Fax : 0-2884-6920

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♦Corporate Information♦ ♦Annual Report 2007♦ Chiangmai 1 Branch 244 Office Building Fl. 2nd-3rd Wowlai Rd. Haiya, Maung Cheingmai 50100

Chonburi Branch 57/1-2 Paspetra Rd. Bangprasroy, Maung Chonburi 20000

Tel : 053-284-000 Fax : 053-284-019

Tel : 038-792-479 Fax : 038-792-493

Chiangmai 2 Branch 201/3 Mahidol Rd. Haiya, Maung Chiangmai 50100

Rayong Branch 180/1-2 Samaphan Building Fl. 2 Sukumvit Rd., Cherng Nern, Maung Rayong 21000

Tel : 053-284-138 Fax : 053-202-695

Tel : 038-862-022 Fax : 038-862-043

Lampang Branch 48/11-12 Montri Rd. Sobtui, Maung Lampang 52100

Aranyapratej Branch 44/4 Bamrungraj Rd. Aranypratej Srakaew 27120

Tel : 054-319-211 Fax : 054-319-216 Chantaburi Branch 203 Fl. 2 Kwang Rd. Talad, Maung Chantaburi 22000 Tel : 039-346-626 Fax : 039-346-631 Samut Sakorn Branch 322/91 Akechai Rd. Mahachai, Maung Samut Sakorn 74000 Tel : 034-837-190 Fax : 034-837-610 Samut Songkram Branch 74/27-28 Soi Bangjakreng 4 Rama 2 Rd., Mae Klong, Maung Samut Songkram 75000 Tel : 034-724-062-7 Fax : 034-724-068

Tel : 037-226-347-8 Fax : 037-266-346 Suratthani Branch 216/3 Moo 4 Chonkasem Rd. Makhamtia Rd., Maung Suratthani 84000 Tel : 077-205-460 Fax : 077-205-475 Hat Yai 1 Branch 1, 3, 5 Soi Juti Uthit 3 Juti Anusorn Rd. Hat Yai Songkhla 90110 Tel : 074-346-400-5 Fax : 074-239-509 Phuket Branch 22/39-40 Wanich Plaza Building Laung Por Wat Chalong Rd. Talad Yai, Maung Phuket 83000 Tel : 076-355-730-6 Fax : 076-355-737 Yala Branch 18 Songpheenong Rd. Sateng, Maung Yala 95000 Tel : 073-255-493-7 Fax : 073-255-498

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♦Chairman’s Statement♦ ♦Annual Report 2007♦ Chairman’s Statement Although Thailand’s export sector still performed well and the actual domestic economic growth rate was better than forecast at the beginning of the year, 2007 was still another challenging year for all businesses that had to work hard to ensure their operating results would not fall. Many problems, such as the rise in oil prices, domestic political instability and fluctuation in exchange rates continued to burden the country. In 2007, many new problems that would have a significant adverse impact on the global economy and capital markets also emerged. All such problems still continue to affect investors’ confidence and must be carefully monitored in 2008. Direct investment activities in 2007 were thus quite sluggish and the stock market was volatile. Nevertheless, due to the relatively low valuation of the Thai stock market, domestic and foreign investors still believed the Thai stock market offered handsome profit opportunities and were confident that a general election would be held around the end of the year. However, in the second half of 2007, trading activity on the SET was relatively sluggish, even though conditions started to improve from the first half. The total trading value of the SET in 2007 was Baht 4.27 trillion, an increase of approximately 7% from Baht 3.98 trillion in 2006. It is noticeable that trading activities via the Internet experienced a significant increase by 117%. While total Internet-based trading value in 2006 was just Baht 0.52 trillion, it jumped to Baht 1.13 trillion in 2007. Simultaneously, securities trading via normal trading systems experienced a decline, with total trading value falling by approximately 9% from Baht 3.46 trillion in 2006 to Baht 3.14 trillion in 2007. The Company was still able to maintain its No.1 position in the securities brokerage business in terms of the highest market share for six years in a row. The total trading value in 2007 was Baht 0.69 trillion, an increase of approximately 1% from Baht 0.68 trillion in 2006. Despite the Company’s high market share in securities trading, it is noticeable that securities trading activities via normal trading systems experienced a decline by only 6% whereas the overall market experienced a 9% decrease. While overall Internet-based trading activity experienced an increase of 117%, those of the Company exhibited an increase of only 51%. Although the Company was still able to maintain its No.1 position in the securities brokerage business, market share dropped from 8.57% in 2006 to 8.10% in 2007. This was because trading activity by foreign institutional investors via the Company in 2007 dropped by 24% from the preceding year. In 2007 trading by domestic institutional investors via the Company increased by only 5% whereas the overall market experienced an increase by 32%. In terms of the derivatives trading business, the Company was able to maintain its top 3 position, with a market share of approximately 11%. Due to sluggish trading activity in the secondary market, the Company’s investment banking and financial advisory revenues were lower than expected. Although many of the Company’s clients were ready to launch their IPOs, they preferred to wait to obtain a good offering price. It is expected that the improving domestic economy will allow the Company to earn more investment banking and financial advisory fees in 2008. In 2007 the Company launched many campaigns aimed to expand its existing and new client base and improve investors’ knowledge through tools such as the NANO CFA (training) Program and the SET50 INDEX Options VCD. It also opened a new branch in downtown Bangkok and launched the “KETrade” Internet-based trading system that allows for convenient,

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♦Chairman’s Statement♦ ♦Annual Report 2007♦ fast and easy securities trading via computers, pocket PCs or mobile phones. It also launched a derivatives trading program called KeLiberty that allows users to see data in the derivatives market on a real-time basis. These initiatives were also intended for the Company to maintain its No.1 position in the securities brokerage business. In addition, the Company put emphasis on improving and solidifying all employees’ knowledge, work ethic and professional conduct to reduce any potential damage due to work misconduct and errors. These effort supported the Company achieving a 3.48% increase in net profit from Baht 532.80 million in 2006 to Baht 551.36 million in 2007. For the year 2008, the Company will continue to embrace good corporate governance principles and correct and improve operational weaknesses to enhance its competitiveness. The Company will further develop and strengthen all employees’ working knowledge, experience and service mindedness to ensure high-quality services to clients based on their professional knowhow and ethical conduct. By doing so, the Company also aims to maintain a No.1 position in all other businesses apart from the securities brokerage business. As the representative of the Board of Directors, I would like to sincerely thank all of the Company’s patrons who have contributed to the progress and growth of the Company and to all of the Company’s executives and employees who have worked hard with great effort, diligence and faith. Finally, I would like to thank all of the Company’s shareholders as well as creditors who continue to provide trust in the Company.

Yuth Vorachattarn Chairman

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ Corporate Governance Report For the year 2007, the Company applied Good Corporate Governance Principles falling under five categories outlined below: Section 1 Shareholders’ Rights 1. The Board of Directors has formulated a written corporate governance policy comprising policies on protecting shareholders’ rights and encouraging shareholders to utilise their legal rights, including basic rights and extra rights, such as rights to: receive profit contributions in the form of dividends; obtain accurate, adequate and transparent information for making decision; vote on Company issues; express opinions in shareholders’ meeting; participate in making decisions regarding to changes in the Company; elect directors; and to obtain timely information via the Company’s website. If necessary, the Company shall also notify its shareholders on important news by mail. 2. The Company has posted notices of shareholders’ meetings, including relevant information such as date, time, place, and meeting agendas, via its website 41 days prior to the date of meeting. 3. The Company has informed its shareholders via the SET’s ELCID System that it has posted notices of its shareholders’ meetings on its website 14 days prior to the date of each meeting for thorough consideration. 4. The Company has asked Thailand Securities Depository (Thailand) Co., Ltd. (TSD), acting as the Company’s securities registrar, to mail notices of shareholders’ meeting to shareholders 18 days prior to the date of each meeting. 5. The Company has posted continually updated information on its website for shareholders’ thorough consideration. 6. The Board of Directors has facilitated shareholders exercising their rights in attending shareholders’ meetings by prohibiting any acts that may limit or restrict shareholders’ access to Company information or the meeting. No abrupt changes in information provided during the meeting are to be made or ad-hoc meeting agendas proposed. Shareholders who arrive late will be allowed to attend meetings. 7. The meeting chairman has provided shareholders convenient and adequate time to express their opinions for each agenda item and ask questions at shareholders’ meetings. The Company has disclosed minutes of meetings for shareholders’ review via its website. Details of the meeting could also be accessed via video posted on the Company’s website. 8. In the shareholders’ meeting, the chairman of each sub-committee, namely the Chair of the Audit Committee, the Chair of the Nomination Committee and the Chair of the Remuneration Committee, attend the meeting. Shareholders are allowed to ask questions on relevant issues. The Company has disclosed the minutes of the meeting for shareholders’ review via its website. Details of the meeting can also be accessed via video posted on the Company’s website. 9. The Company has realised that improper use of inside information may provide unfair treatment to shareholders. Thus the Company has formulated and promulgated a policy asking for cooperation from directors, executives and staff who obtain the Company’s confidential financial information not to trade the Company’s securities for 30 days prior to announcement of the operating results of each quarter. The Company also asked its directors and executives to provide reports of their securities holdings from time to time.

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ For the Year 2007, all of the Company’s directors and executives provided full cooperation and strictly followed the Company’s policy, and no directors or executives traded the Company’s securities during black-out periods. 10. The Company has formulated and promulgated a policy requiring any director and executive who may have a conflict of interest in any transaction to immediately disclose such a conflict of interest to the Board of Directors. No director (s) or executive (s) with a conflict of interest will be allowed to attend a meeting for consideration and approval of a related transaction. For 2007, there were no transactions between the Company and directors and/or executives with any conflicts of interest. Section 2 Fair and Equal Treatment to Shareholders For 2007, the Company put emphasis on providing fair and equal treatment to all shareholders, and it has followed good corporate governance principles as prescribed by the Office of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) regarding the holding of shareholders’ meeting. According to the Annual General Shareholders’ Meeting (AGM) on March 20, 2007: Before the Meeting 1. The Board of Directors formulated a policy allowing minor shareholders who hold no more than 2% of total paid-up shares to propose additional meeting agenda items and names of persons to be elected as the Company’s directors via its website three months prior to the date of the shareholders’ meeting. For the 2007 AGM, the Company allowed minor shareholders to propose additional meeting agenda items and names of persons to be elected as the Company’s directors via the Company’s website during the period between October 16, 2006 and January 15, 2007 (three months prior to the date of the shareholders’ meeting). Unfortunately, during said period, no minor shareholders proposed additional meeting agenda items and names of persons to be elected as Company directors. This may be because the Company failed to inform this news via the SET ELCID System, and thus no minor shareholders knew about this policy. Thus, for the 2008 AGM, the Company informed this news via the SET ELCID System, urging minor shareholders to propose any additional meeting agenda items and names of persons to be elected as Company directors. For 2008, the Company will allow minor shareholders to propose additional meeting agenda items and names of persons to be elected as Company directors via the Company website during the period between October 16, 2007 and January 15, 2008. The Company posted the news on the SET ELCID System on October 18, 2007. 2. In the case minor shareholders propose additional meeting agenda items, the Board of Directors will include such agenda(s) items in the shareholders’ meeting when it deems that such agenda(s) will benefit most shareholders. However, for the 2007 AGM, no minor shareholders proposed additional meeting agenda items. 3. In case shareholders cannot attend the meeting, the Company allows them to appoint a person or an independent director to vote on their behalf as a proxy. For the 2007 AGM, 17 shareholders appointed Mr.Yuth Vorachattarn, who has been an independent director of the Company, to vote on their behalf as a proxy. 4. The Company has publicised shareholders’meeting information, including the date, time, place, and meeting agenda via its website 41 days prior to the date of the shareholders’ meeting.

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ 5. The Company has informed its shareholders via the SET ELCID System that it has posted the notice of the shareholders’ meeting on its website 14 days prior to the date of the meeting for their thorough consideration. 6. The Company has asked Thailand Securities Depository (Thailand) Co., Ltd. (TSD), acting as the Company’s securities registrar, to mail the notice of the shareholders’ meeting to shareholders 18 days prior to the date of the meeting. 7. The Company has posted a newspaper advertisement for at least three consecutive days prior to the date of shareholders’ meeting to inform shareholders of the meeting. On the Date of the Meeting 1. The Company facilitate the meeting registration by using a computerised system to aid the registration process. 2. The Company hold the shareholders’ meeting on the date, at the time and in the place specified in the notice of the shareholders’ meeting. There will be no abrupt changes in the meeting place so shareholders would not be able to attend the meeting. 3. The meeting chairman clarifies the quorum, explains the voting, vote-counting and balloting procedures and clearly discloses voting results on each agenda item. 4. There will be no ad-hoc meeting on agenda items to be proposed by shareholders, who are the Company’s executives. 5. The meeting chairman will convene the meeting in accordance with the order as specified in the notice of the shareholders’ meeting. 6. The meeting chairman will allow shareholders to ask questions or express their views in a reasonable and adequate way. 7. The meeting chairman will urge the use of balloting cards in each meeting agenda item for transparency in vote-counting results. 8. Each shareholder is allowed to exercise his/her rights in electing directors on an individual basis. After the Meeting 1. The Company’s Secretary will be responsible for preparing the minutes of the shareholders’ meeting with opinions of and questions from shareholders. The minutes of shareholders’ meeting would be re-checked for accuracy by the Company’s executives. 2. The Company will publicise the minutes of the shareholders’ meeting in both paper and video formats via its website 7 days after the date of the meeting, so that shareholders who did not attend the meeting, can check and acknowledge details of the meeting on an equal basis. Section 3 Rights and Roles of Stakeholders 1. The Board of Directors recognises and ensures that the legal rights of all stakeholders are protected and treated with care. Details are as follows: Shareholders: The Company puts emphasis on generating profitability to provide a good investment return to all shareholders. The Company’s dividend payment policy is to pay out at least 40% of net profit. The Company has encouraged shareholders to exercise their legal rights and will treat all shareholders equitably. For 2007, the Company made a dividend payment, with details as follows:

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ Details of Profit Contribution Net Profit Legal Reserve Total No. of Shares Outstanding Dividend per Share Total Dividend Payment Dividend Payout Ratio (%)

The Year 2005 714,978,123 35,748,906 545,000,000

Unit: Baht Operating Results The Year First 6 months of the 2006 Year 2007 532,799,275 167,256,822 26,639,964 8,362,841 548,130,200 552,703,400

1.18 643,100,000 90

0.87 476,090,724 89

0.20 110,540,680 66

Clients: The Company urges its staff to treat all clients fairly and equitably by providing them with high-quality services and keeping client information confidential. The Company urges its Compliance Department to monitor all staff to ensure they have treated all clients equally and fairly, kept client information confidential and provided them with high-quality services. Competitors: The Company treats all of its competitors fairly and equitably and will strictly comply with mutual agreements, member agreements and all relevant applicable rules and regulations. In 2007, the Company had no legal dispute with any competitor. Creditors: The Company will strictly comply with all agreements with its creditors. In 2007, the Company was in full compliance with all agreements with its creditors. Employees: The Company will treat all employees equitably and fairly by providing them with proper remuneration, arranging safe working places with good conditions for them and encouraging them to improve and develop their professional skills and experience for their career progress. It has provided health insurance for all staff. In the Year 2006, the Company issued and allocated ESOP warrants with a term of 4 years to its employees. Such warrants were allocated to the Company’s employees on an equitable basis, taking into account his/her years of service, experience and job capability. Society: The Company has put emphasis on saving the environment, aiding society and supporting religious activities. In 2007, the Company had put an emphasis on saving the surrounding environment, aiding society and supporting religious activities as follows; • A one hour electricity savings program during the lunch hour; • The use of recycled paper; • Donation of food and drinks to army forces in the south of Thailand; • A blood donation program; • Merit-making activities; • The Company invited groups of university students to join on company visits on a regular basis. 2. The Board of Directors has formulated and implemented clear policies and procedures in regard to potential fraudulent activities. Anyone who faces or sees potential fraudulent activities must inform the Compliance Department of these and they will in turn report them to the Audit Committee. All complaints will be kept confidential and the names of persons who make complaints will not be publicly disclosed. Pages 10

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ Section 4 Information Disclosure and Transparency 1. Efficiency of Information Disclosure Process in accordance with the Rules of Listed Companies The Company has disclosed information in accordance with relevant rules via the SET ELCID System, 56-1 Form, 56-2 Form (Annual Report) and its website in both Thai and English. The Company continually updates such information. For 2007, the Company strictly complied with relevant disclosure rules and was not penalised or sanctioned by relevant regulatory bodies due to improper disclosure of information. 2. Quality of Financial Reports The Board of Directors prepared the Report regarding the Responsibility of the Board of Directors for Financial Reports that was accompanied by the Auditor’s Report in the Annual Report. This report is signed by the Chairman, the Chief Executive Officer and the Chief Operating Officer. The Company has disclosed such information on the Company’s website. 3. Investor Relations 3.1 The Board of Directors has set up an Investor Relations Unit that is under the direct control of the Corporate Communications Department. The Investor Relations Unit is responsible for disseminating accurate, complete and timely data and news regarding the Company’s activities to its shareholders, investors, securities analysts and the general public via various forms of media such as brochures, newspaper, radio, television, meetings and the website. The Investor Relations Unit also helps to facilitate shareholders in case they have difficulty contacting the Company. Investors can contact the Investor Relations Unit at Phone No.0-2658-6300 ext. 7401 - 7402 or by E-mail: CorporateCommunication@kimeng.co.th. 3.2 In 2007, the Company’s executives and the Investor Relations Unit provided the Company’s information via 4-5 meetings with local and foreign institutional investors, 4 meetings with investors, securities analysts and mass media during operating results periods and in the annual operating plan announcements, as well as in 50 phone conversations.

Section 5 Responsibilities of the Board of Directors 1. Composition of the Board of Directors 1.1 The Board of Directors consists of 9 directors which composed of: 2 executive directors 7 non-executive directors (3 of whom are independent directors) The Company has long realized the importance of the appropriate composition of the Board of Directors, and nominates its directors in such a manner that there is a balance of power between executive and non-executive directors. The composition of the Board of Directors is such that independent directors will co-work with directors who represent the major shareholder and executive directors. The number of independent directors will not be fewer than those as specified in good corporate governance principles as prescribed by the SET. The Chairman is also an independent director. The number of non-executive Pages 11

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ directors (7 persons) is higher than that of the executive directors (2 persons), so that independent directors can freely express their opinion and make decisions and the Board of Directors can perform their duties efficiently. The Board of Directors appoints one secretary to the Board of Directors and one company secretary. The names of directors and duties & responsibilities of the Board of Directors are shown in the topic “the Board of Directors and Management Structure” on P. 19 1.2 The Board of Directors consists of experts in many fields who possess a variety of knowledge, capability, professional experience, business moral and loyalty. They are willing to dedicate themselves for the good of the Company. 1.3 Members of the Board of Directors have terms of office not exceeding 9 years. There is an exception in case it deems to shareholders or the Board of Directors that some directors play an important role in growth and success of the Company. In such case, terms of office of such directors can be extended as appropriate. The Company policy regarding directors’ terms of office is clearly specified in its corporate governance policy. 1.4 The qualifications of the Company’s independent directors were in line with those prescribed by the SEC and the SET. Nevertheless, as the Company would like its independent directors to actually act and express their opinions independently, it has prescribed additional qualifications for independent directors that are stricter than those as prescribed by the SEC and the SET. Such qualifications include: Holding shares not more than 1% of all voting rights of the Company, any companies in the Kim Eng Group and its associated companies; Not being a member of management, employee, staff member or advisor who receives a regular compensation from the Company, or controlling person of the Company, any company in the Kim Eng Group and its associated companies, or person with potential conflict of interest for at least one year prior to nomination; Having no business relationship or direct or indirect potential conflict of interest in terms of financial and general management of the Company, any company in the Kim Eng Group, its associated companies and other persons with potential conflict of interest that may interrupt his independent discretion or opinion on the Company’s operations; Not being a person who has legal registered relationship in the form of close relative, major shareholder or controlling person of the Company, any company in the Kim Eng Group, its associated companies, persons with potential conflict of interest, or persons who are nominated to take care of the interest of major shareholder. 1.5 No directors of the Company can hold a directorship in more than 5 other listed companies. In case it is necessary for any director of the Company to hold a directorship in more than 5 other listed companies, he must obtain an approval from the Board of Directors beforehand. Details regarding holding directorships of directors are disclosed in the topic “the Board of Directors and Management Structure” on p. 33 For 2007, no directors of the Company held directorships in more than 5 other listed companies. 1.6 There has been a separation of the position between the Chairman and the Chief Executive Officer to create a checks and balances mechanism, so that no one has absolute power. The Company has clearly specified roles, powers and duties of each person, such that the Chairman is an independent director and plays a leading role in formulating operating policies. The Chief Executive Officer plays a leading role in managing the Company.

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ 1.7 In case of an expiry in terms for holding office of any director, the Company allows minor shareholders to propose name(s) or person(s) to be nominated as a director (s), provided that such person(s) has the qualifications in line with the Company’s rules. When complete information about the person(s) proposed to be the Company’s director(s) is obtained, the Nomination Committee will consider their qualifications prior to proposing to the shareholders’ meeting for nomination. For the year 2007, no minor shareholders proposed the name(s) of person(s) to be nominated as the Company’s director(s). 2. The Sub-Committees 2.1 For transparency and independence in performing their duties, most members of the sub-committees are independent directors. Independent directors are appointed as the chair of each sub-committee. Details regarding sub-committees are showed in the topic “the Board of Directors and Management Structure” on p.19 2.2 Mr.Yuth Vorachattarn, the Company’s Chairman, was also appointed as the Chair of the Audit Committee. However, Mr. Yuth considered that holding the position as the Chairman and the position as the Chair of the Audit Committee simultaneously might be improper and not in line with the principles of good corporate governance. He thus resigned from the position as the Chair of the Audit Committee, effective from October 18, 2007. The Board of Directors thus appointed Dr. Paiboon Sareewiwatthana as the Chair of the Audit Committee for transparency and independence in performing duties.

3. Roles, Duties and Responsibilities of the Board of Directors 3.1 In 2007, the Board of Directors considered and approved important matters in relation to the Company’s operation such as formulation of its vision, mission, strategy, financial objective, risk, operation plan and budget. The Board of Directors supervised, controlled and monitored the management to ensure they have run the Company in accordance with the specified policy and plan efficiently and effectively to enhance sustainable economic value for the Company, its shareholders and all stakeholders. Evaluation of the Company’s operating result indicates that despite unfavorable conditions of the Thai stock market, the Company still managed to maintain a market share of 8-9 %. 3.2 The Board of Directors communicated the Company’s strategy, objectives and operating result to directors/executives/staff throughout the organisation. The Company held a meeting to communicate its strategy, objectives and operating result to executives and management so that they could communicate the message to the departments under their supervision. The Company also communicated important messages via its Intranet System (Keplanet) and E-mail system. 3.3 The Board of Directors also formulated and approved the Company’s written policy on corporate governance. In October 2006, the Board of Directors reviewed such policy. Evaluation of the Company’s compliance with good corporate governance principles indicated that the Company complied with most of the principles, with details as discussed earlier. 3.4 The Board of Directors formulated a written business ethics and professional conduct to be used as reference by directors, executives and staffs in managing the Company’s business. Compliance with such written business ethics and professional conduct is closely monitored. 3.5 The Company formulated the policy regarding conflicts of interest. In case any director has potential conflict of interest in connection with the transaction being considered, such director is not allowed to participate in the consideration and Pages 13

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ approval of such transaction. For any transaction with significant conflict of interest, the Board of Directors may assign the Audit Committee to consider the transaction before providing their independent opinion to the Board of Directors. In case the Audit Committee does not have the necessary expertise to consider a particular related transaction, the Company shall arrange for an independent expert or the auditor of the Company to provide opinion on such related transactions to assist the Board of Directors or the shareholders in making decisions. In the year 2007, there was one related transaction that was thoroughly considered by the Audit Committee prior to being proposed to the Board of Directors for consideration. Details regarding such related transaction was disclosed to the SET via ELCID System and the Company’s notes to financial statements. 3.6 As the Compliance Department is an independent unit directly under the supervision of the Audit Committee, the Audit Committee thus assigns the Compliance Department to monitor the Company’s operating control, financial reports and compliance with relevant rules, regulation and policies. In 2007, it was found that the Company’s operation was in compliance with relevant regulations and its policy. 3.7 The Board of Directors asked the Risk Management Department to prepare a risk management policy for the overall organisation. The Company’s Management has implemented such policy and reported the result of implementation to the Board of Directors from time to time. The effectiveness of the risk management policy and system will be reviewed or evaluated at least once a year and every time it is found out that the level of risk changes. Any warning signs and abnormal transactions will be carefully reviewed, considered and dealt with seriously. In the year 2007, it was found no operation activities might be exposed to significant level of risk. 4. Meeting of the Board of Directors 4.1 The Company’s secretary sets up a meeting schedule for the whole year in advance and informs each director such meeting schedule so that they can arrange time to join the meeting. 4.2 The Board of Directors’ meeting will be held every other month. In the year 2007, the Board of Directors’ meetings were held 7 times. Details of the Board meeting are showed in the topic “the Board of Directors and Management Structure” on p.20 4.3 The Chairman and the Chief Executive Officer will co-consider selecting meeting agenda items to be proposed for the Board of Directors’ meeting. Each director could propose a meeting agenda item independently. 4.4 Notice to the Board of Directors’ meeting will be sent to each director at least 3 days prior to the date of meeting. 4.5 The Board of Directors can invite any involved executive or personnel for inquiry during the meeting. 4.6 After the meeting, the secretary to the Board of Directors will prepare clear and precise minutes of the meeting and inform relevant department(s) the resolution(s) of the meeting so that they can implement policy(s) or plan(s) as specified. Results of implementation will be later notified to the Board of Directors. 4.7 In each meeting, the Chairman lets each director express his opinion extensively and freely. Each director thus may express his opinion extensively and listen to others’ opinions. Each decision is made rationally and thoroughly. Although the Chairman allows each director to express opinion in the meeting extensively, each director presents his opinion concisely. Thus, it normally takes no more than 3 Pages 14

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ hours on average to run the meeting, which the Board of Directors considers that it is sufficient to consider each meeting agenda item thoroughly. 4.8 Good corporate governance report must be approved by the Board of Directors. On October 18, 2007, the Board of Directors’ meeting reached a resolution to appoint the Corporate Governance Committee that is responsible for formulating good corporate governance principles, monitoring, evaluating and promoting compliance with the Company’s good corporate governance principles. 5. Self-Evaluation of the Board of Directors and Conclusion for the Year 2007 5.1 The Board of Directors conducts self-evaluation once a year. In 2007, the Board of Directors conducted a self-evaluation on December 13, 2007, and there still exists a deficiency as the Company failed to send the notice of shareholders’ meeting to the Board of Directors at least 7 days prior to the date of meeting. 5.2 Self-evaluation was conducted on an overall basis rather than on any individual director. 5.3 The conclusion from self-evaluation of the Board of Directors for the Year 2007 indicates that there has been a deficiency still needed to be improved, namely submission of sufficient documents prior to date of meeting. The Company is in the process of correcting such deficiency. 6. Remuneration and Compensation 6.1 Directors’ remuneration and compensation are determined based upon 4 criteria, namely 1) Comparison with the level of remuneration and compensation made to directors of other firms in the securities brokerage business 2) Role and responsibility of each director 3) the Company’s overall operating performance and 4) Dividend payment made to shareholders. Compensation and remuneration made to directors must be approved by the shareholders’ meeting. Details of remuneration and compensation made to directors are showed in the topic “the Board of Directors and Management Structure” on p.30 6.2 Compensation and remuneration made to the Chief Executive Officer, determined based upon his duties, responsibilities, performance and the Company’s operating performance, must be considered and approved by the Board of Directors. The Board of Directors evaluates performance of the Chief Executive Officer by comparing with the stated operating goals and objectives on an annual basis. During any operating year, the Management will compare the Company’s actual operating performance with the stated operating goals and objectives and present the result of comparison in each Board of Directors’ meeting and prior to preparing operating budget for the next year. The Board of Directors will evaluate performance of the Chief Executive Officer on an annual basis. 7. Development of Directors and Executives 7.1 In 2007, no new director was appointed. In case a new director is appointed, the Company’s secretary will prepare relevant documents and information that is beneficial to the newly appointed director in acting in the capacity of directorship. Information related to the Company’s business characteristics and operating philosophies would be provided to the newly appointed director. 7.2 The Company has prepared a succession plan for the Chairman and the Chief Executive Officer on both ad-hoc and permanent basis. On an ad-hoc basis, other executives will act in such capacity on a temporary basis. On a permanent basis, the Nomination Committee will consider and appoint qualified personnel later. In the year 2007, the succession plan was implemented on an ad-hoc basis when the Chairman and the Chief Executive Officer were both on annual leave. Pages 15

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♦Corporate Governance Report♦ ♦Annual Report 2007♦ 7.3 The Company encourages and facilitates training and development for its staff. In 2007, it sent the Company’s secretary, legal officers and compliance officers to attend a training course regarding corporate governance. Evaluation of compliance with good corporate governance principles for the year 2006 indicates that there were still some principles with which the Company has not yet to comply. The Company is in the process of correcting such deficiencies. The deficiencies could be summarised as follows: 1. The means of allowing shareholders to submit questions via the Company’s website prior to the date of shareholders’ meeting is still not clear. 2. Some directors failed to attend the shareholders’ meeting. However, at least the Chairman, the Chief Executive Officer, the Chair of the Audit Committee, the Chair of the Remuneration Committee and the Chair of the Nomination Committee attended every shareholders’ meeting. 3. No policy regarding environment and society and result of compliance with the stated policy were disclosed on the Company’s website. 4. Each director obtained notices of meeting with complete material information only 3 days prior to the date of the Board of Directors’ meeting. Good corporate governance principles regarding the meeting of the Board of Directors indicates each director must receive notices of meeting and relevant information at least 7 days prior to the date of meeting. 5. In the notice of the shareholders’ meeting, the Company’s articles of association regarding the holding of a shareholders’ meeting were not sufficiently provided. The Company is in the process of correcting some deficiencies in compliance with good corporate governance principles.

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♦Shareholder Structure♦ ♦Annual Report 2007♦ Shareholder Structure 1. Share Capital of the Company As at December 31, 2007, the Company had a total registered share capital of Baht 2,861,250,000, with total paid-up capital of Baht 2,781,808,500 comprised of 556,361,700 ordinary shares at par value Baht 5 each. 2. Shareholders The Company’s major shareholder is Kim Eng Holdings Ltd. that held 56.77 % of the Company’s total paid-up capital. The followings are details on the Company’s shareholders as at August 23, 2007, the latest book closing date. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Name Kim Eng Holdings Limited Thai NVDR Co., Ltd. Chase C.S. Central Nominee Limited UBS AG, London Branch-Asia Equity TFB For MFC-Thai Fund Investment Plan Gerlach & Co-TCW Americas Development Association, LP Mr. Chuen Prasertkittikul Mr. Thanit Lappanichpoonpol Merrill Lynch International-GEF Account Client General THB Others

Total

No. of Shares Held

%

315,862,471 33,843,434 5,651,000 3,250,000 2,508,900

56.77 6.08 1.02 0.58 0.45

2,150,000

0.39

2,000,000 1,800,000

0.36 0.32

1,500,000

0.27

188,195,881

33.75

556,361,700

100.00

Kim Eng Holdings Limited. has a total 600,082,954 shares. Kim Eng Holdings Limited has total paid-up shares of 600,082,954. It bought back (Treasury Stock) in the total of 16,671,000 shares. Thus, the total number of shares outstanding is 583,411,954. The top-10 major shareholders are as follows: No. 1. 2. 3 4. 5. 6. 7. 8. 9. 10. 11.

Name Kim Eng Securities Pte. Ltd.* DBS Nominees Pte Ltd Mr. Ooi Thean Yat Ronald United Overseas Bank Nominees Pte Ltd Morgan Stanley Asia (Singapore) Securities Pte. Ltd DBSN Services Pte Ltd Citibank Nominees Singapore Pte Ltd Shun Fung Holdings (Private) Limited Raffles Nominees Pte Ltd HSBC (Singapore) Nominee Pte Ltd Others

Total

No. of Shares Held

%

173,921,568 69,973,017 65,544,928 41,391,400 28,208,500 22,083,105 18,936,453 18,300,000 15,590,300 13,034,900 116,427,783

29.81 11.99 11.23 7.09 4.84 3.79 3.25 3.14 2.67 2.23 19.96

583,411,954

100.00

Remark: * Kim Eng Securities Pte. Ltd. is held by Yuanta Securities Asia Financial Services Limited (“YSAF”) 168.48 million shares and by other individual customers 5.45 million shares. However, Yuanta Core Pacific Securities Co., Ltd. (“YCPS”) fully holds YSAF 100 %. Hence, YCPS indirectly holds Kim Eng Holdings Ltd. at the same amount.

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♦Shareholder Structure♦ ♦Annual Report 2007♦ 3. Dividend Payment Policy The Company has the policy of making dividend payment at a rate not less than 40% of its net profit after deduction of all reserves as specified by the Company. Dividend payment made each year depends upon the Company’s investment plan, necessity and situation in the future. The Board of Directors can propose the final dividend payment during its board meeting and present to shareholders during a shareholders’ meeting for approval. The Board of Directors is authorised to decide an interim dividend payment, but needs to inform the shareholders at the next shareholders’ meeting.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ Committees and Management Structure The Company’s management structure is comprised of the Board of Directors, the Management Committee, the Audit Committee and the Risk Management Committee. All of the Company’s directors and management are qualified in accordance with Section 68 of the Public Limited Companies Act B.E.2535 and the Notification of the Securities & Exchange Commission No. Kor Jor 12/2543 regarding Obtaining for Approval and Approval for Issuance of Ordinary Shares dated March 22, 2000. The Company’s management structure consists of the following sub-committees: 1. The Board of Directors As at December 31, 2007, the Company’s Board of Directors comprised of 9 directors as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Name Mr. Yuth Vorachattarn Mr. Ronald Anthony Ooi Thean Yat Mr. Montree Sornpaisarn Mr. Judd Kinne Mr. Hwang Wei-Cherng Mr. Pusit Keawmongkolsri Ms. Chao Tse Yang Dr. Paiboon Sareewiwatthana Dr. Preecha Jarunggidanan

Title Chairman and Member of the Audit Committee Director Director Director Director Director Director Director and Chairman of the Audit Committee Director and Member of the Audit Committee

Mr. Waranchai Janesiriwanich acts as the Corporate Secretary. Name Mrs. Gloria Lee Kim Yew

Title Honorary Chairman

Mrs. Gloria Lee Kim Yew has held the Honorary Chairman position since August 10, 2006. Authorised Directors who can sign on behalf of the Company Authorised directors who can sign and bind the Company are any two of the following four directors, provided that they jointly sign with the Company’s seal affixed: Mr. Montree Sornpaisarn, Mr. Judd Kinne, Mr. Hwang Wei-Cherng and Mr. Pusit Keawmongkolsri. Scope of Power and Duties of the Board of Directors 1. To manage the Company’s operations to ensure compliance with laws as well as the objectives and articles of association of the Company and resolutions of the Company’s meeting of shareholders with honesty and due care for the interests of the Company. 2. To set goals, guidelines, policies, operating plans and budget of the Company, control and supervise the administration of the Management Committee to ensure the management performs competently and complies with the policies prescribed in an efficient manner. Exceptions to this are transactions such as increase/decrease of capital,

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♦Market and Business Condition♦ ♦Annual Report 2007♦ issuance of debentures, selling or transferring the business of the Company in whole or in major part, buying or taking control of other companies, amending the memorandum of association or articles of association, and giving benefits to directors. In such matters, the Board of Directors needs to obtain approval from a shareholders meeting prior to carrying out such transactions. 3. The Board of Directors may, as deemed appropriate, elect some directors and management as the Management Committee, provided that they shall have power and duties to conduct the Company’s business as designated by the Board of Directors. The Board of Directors shall elect one member of the Management Committee as Chairman of the Management Committee. In the year 2007, the Board of Directors held 7 meetings. For the Company’s best practice, there must be at least two-thirds of the Board of Directors’ members attending each session. Details of the Board of Directors’ Meeting. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Name Mr. Yuth Vorachattarn Mr. Ronald Anthony Ooi Thean Yat Mr. Montree Sornpaisarn Mr. Judd Kinne Mr. Hwang Wei-Cherng Mr. Pusit Keawmongkolsri Ms. Chao Tse Yang Dr. Paiboon Sareewiwatthana Dr. Preecha Jarunggidanan

Number of Attendance 7 6 7 6 2 7 6 7 7

Scope of Duties and Responsibilities of the Corporate Secretary 1. Prepare and maintain the following documents: a. Directors' Registry b. Notices for the Board of Directors' Meetings, Minutes of the Board of Directors’ Meetings and Annual Report of the Board of Directors c. Notices for the Shareholders' Meetings and Minutes of the Shareholders' Meetings 2. Maintain the Report on Stake Holding of Directors and Management: 3. Carry out other tasks as assigned by the Board of Directors.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ 2. Management Committee As at December 31, 2007, the Company’s Management Committee is comprised of 5 directors as follows: Name Title 1. Mr. Montree Sornpaisarn Chairman of the Management Committee 2. Mr. Supachai Ekkul Member of the Management Committee 3. Mr. Pusit Kaewmongkolsri Member of the Management Committee 4. Ms. Boonporn Boriboonsongsilp Member of the Management Committee 5. Mr. Ong Cheow Kheng Member of the Management Committee Scope of Power and Duties of the Management Committee 1. To set the Company’s goals, policies, operating plans and annual budget as proposed by the management prior to submitting to the Board of Directors for approval, including approval for amendment and addition of the Company’s annual operating budget in the amount not to exceed Baht 1 million, when there is no Board of Directors’ meeting to approve such matters before informing all directors in the next meeting: 2. The Company’s management that is responsible for conducting matters related to the Company’s operation must report the following matters to the Management Committee from time to time: 2.1 Audit report from the SEC 2.2 Audit report from the SET 2.3 Internal audit report 2.4 Quality control report of the Company 2.5 Performance report as related to the Company’s operating plan 3. To approve expenditures that are in excess of the amount that could be approved by authorized management. Such approval must be in line with the guidelines as set forth by the Board of Directors: 4. To approve major capital expenditures as specified in the Company’s annual budget, or that approved by the Board of Directors: 5. To approve opening of securities trading accounts and other transactions related to securities brokerage business. The Management Committee could sub-grant power to grantee, provided that such sub-granting is in line with the scope of power as authorised by the Board of Directors: 6. To approve in principal investment for business expansion and business venture with other firms and to inform such matters in the next Board of Directors’ meeting:

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♦Market and Business Condition♦ ♦Annual Report 2007♦ 7. To provide advice to management in regards to financial, marketing, human resources management policies and other matters related to securities brokerage, securities underwriting, and investment banking businesses as well as new businesses: 8. To allocate allowances, benefits and compensations as approved by the Board of Directors to the Company’s employees and any other persons who work for the Company: 9. To approve change of conditions of credit or settle debtors’ obligations: 10. To approve acquisition of office equipment, land and land improvement in the amount exceeding Baht 500,000. Such approval must be in accordance with scope of power as designated by the Board of Directors: 11. To approve appointment, transferal and termination of employment of management-level employees: 12. To perform any act as authorized by the Company’s Board of Directors from time to time. The Management Committee does not have the power to approve any transactions or matters where there is a conflict of interest with the Company or its subsidiary (if any). Disclosure of transactions with conflict of interest must be made to the Board of Directors for consideration. Scope of Power and Duties of the Management Committee is in accordance with guidelines for granting power by the Board of Directors that was authorized by the Board of Directors’ meeting No.12/2545 held on October 17, 2002. Any matters that are beyond the scope as specified above, the Management Committee cannot conduct such matters, except in case approval and assignment by the Board of Directors on a case-by-case basis. For the Year ended December 31, 2007, the Management Committee held meetings 44 times, and in each meeting, at least two-thirds of the Management Committee attended the meeting. 3. Audit Committee The Audit Committee comprises of 3 directors as follows: Name Title 1. Dr. Paiboon Sareewiwatthana Chairman of the Audit Committee* 2. Dr. Preecha Jarunggidanan Member of the Audit Committee 3. Mr. Yuth Vorachattarn Member of the Audit Committee * Appointed on October 18, 2007 Scope of Duties and Responsibilities of the Audit Committee 1. Review the Company’s financial reports to ensure their accuracy and sufficient disclosure of information by coordinating with external auditors and management responsible for preparing quarterly and yearly financial reports. The Audit Committee may suggest issues or matters to be included for review or audit by the external auditors while auditing of the Company is proceeding:

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♦Market and Business Condition♦ ♦Annual Report 2007♦

2. Review the adequacy and effectiveness of the internal control systems and internal audit functions by coordinating with the external auditors and internal auditors: 3. Review the Company’s compliance with the Securities and Stock Exchange Act, rules and regulations of the Stock Exchange of Thailand or other laws relating to securities businesses: 4. Consider and advise on an appointment of the external auditors of the Company, including the audit fee by considering the credibility, the adequacy of existing resources, the firm’s performance and experience of its professional staff: 5. Consider proper and full disclosure of information on connected transactions or conflict of interest: 6. Conduct any other matters assigned by the Board of Directors and agreed by the Audit Committee such as reviewing the Company’s financial and risk management policies, reviewing compliance with the Code of Conduct by the management and reviewing all important reports in conjunction with the management to be disclosed to the public as required by law (e.g. management report and management, discussion and analysis (MD&A)): 7. Report activities of the Audit Committee in the Company’s annual report signed by the Chairman of the Audit committee. Such reports should include the following information: - Opinion on accuracy, completeness and reliability of the Company’s process of reporting and disclosing financial information; - Opinion on sufficiency of the Company’s internal control system; - Supporting reasons whether or not the Company’s external auditors should be re-appointed; - Opinion on the Company’s compliance with the Securities and Stock Exchange Act, rules and regulations of the Stock Exchange of Thailand or other laws relating to its businesses; - Other reports deemed appropriate to be disclosed to shareholders and general investors as assigned by the Board of Directors.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ In 2007, the Audit Committee held 8 meetings, with details as follows: Meeting Dr.Paiboon Sareewiwatthana

Dr.Preecha Jarunggidanan

Mr.Yuth Vorachattarn

30/01/2007

3

3

3

2/2007

30/03/2007

3

3

3

3/2007

30/04/2007

3

3

3

4/2007

29/06/2007

3

3

3

5/2007

31/07/2007

3

3

3

6/2007

27/09/2007

3

3

3

7/2007

31/10/2007

3

3

3

8/2007

03/12/2007

3

3

3

No.

Date of Meeting

1/2007

Auditor 3(Audited 2006 Financial Statements) 3(Reviewed Q.1/2007 Financial Statements) 3(Reviewed Q.2/2007 Financial Statements) 3(Reviewed Q.3/2007 Financial Statements) -

4. The Nominating Committee The Nominating Committee was set up in accordance with the resolution of the Board of Directors’ meeting No.2/2549 held on February 21, 2006. The Nominating Committee is comprised of 5 directors as follows:

1.

Name Dr. Preecha Jarunggidanan

2.

Dr. Paiboon Sareewiwatthana

3.

Mr. Yuth Vorachattarn

4.

Mr. Judd Kinne

5.

Ms. Chao Tse Yang

Title Chairman of the Nominating Committee and Independent Director Member of the Nominating Committee and Independent Director Member of the Nominating Committee and Independent Director Member of the Nominating Committee Member of the Nominating Committee

Scope of Duties and Responsibilities of the Nominating Committee are as follows: 1. To nominate qualified candidates as new directors or CEO. 2. To determine the procedures and criteria for nomination of Company’s directors or CEO to ensure transparency.

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♦Market and Business Condition♦ ♦Annual Report 2007♦

In 2007, the Nominating Committee held 1 meeting, with details as follows: Name No.1/2007 on February 6, 2007 3 Dr. Preecha Jarunggidanan 3 Dr. Paiboon Sareewiwatthana 3 Mr. Yuth Vorachattarn 3 Mr. Judd Clark Kinne 3 Ms. Chao Tse Yang 5. Other Committees 5.1 The Compensation Committee The Company’s Compensation Committee is comprised of 5 directors as follows: Name Title Chairman of the Compensation 1. Dr. Paiboon Sareewiwatthana Committee and Independent Director Member of the Compensation 2. Dr. Preecha Jarunggidanan Committee and Independent Director Member of the Compensation 3. Mr. Yuth Vorachattarn Committee and Independent Director Member of the Compensation 4. Mr. Hwang Wei-Cherng Committee Member of the Compensation 5. Mr. Judd Clark Kinne Committee The Compensation Committee is responsible for formulating the Company’s policies with regard to employment and compensation for employment or termination of employment to be granted or awarded to the Company’s employees or directors, and determining the level of compensation and other remunerations to be granted to employees and directors. The Compensation Committee has scope of power and duties as follows: To determine and set fair and clear compensation of any kind to be granted or awarded to directors and employees of the Company: To consider granting or awarding compensation of any kind to management as appropriate, including payment of bonus and payment in the form of securities granting: To conduct any activities deemed necessary and appropriate in conforming with compensation policy regarding form, procedures and details about allocating of securities to employees. The Chairman of the Compensation Committee would be responsible for providing any information necessary for conducting research in regard to employment to external advisors freely. The Compensation Committee would be responsible for controlling expenses incurred to employ such independent external advisors as well as considering and reviewing appropriate compensation rate, taking into account all relevant factors. The Compensation Committee would specify compensation base, increase in compensation and the overall compensation policy. The Compensation Committee will report

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♦Market and Business Condition♦ ♦Annual Report 2007♦ such matters directly to the Board of Directors and provide opinion on the compensation to be made to senior management. The Compensation Committee would accept and listen to opinion as provided by the CEO and the COO, and provide recommendations to the Board of Directors for approval. In the year 2007, the Compensation Committee held two meetings, with details as follows: Name

No.1/2007 on February 6, 2007

Dr. Paiboon Sareewiwatthana Dr. Preecha Jarunggidanan Mr. Yuth Vorachattarn Mr. Judd Clark Kinne Mr. Hwang Wei-Cherng

No.2/2007 on August 8, 2007

-

5.2 The Underwriting Committee The Underwriting Committee was set up in accordance with the resolution of the Board of Directors’ meeting No.11/2545 held on September 20, 2002. The Underwriting Committee, with authority and duties in approving the Company to act as lead underwriter or co-underwriter for both debt and equity securities, comprised of; Chief Executive Officer (CEO) Chief Financial Officer (CFO) Managing Director-Credit and Risk Control Department Managing Director-Retail Client Department Composition of the Committee Must consist of at least three members, one of whom must be the CEO who acts as the Chairman of the Underwriting Committee and is responsible for monitoring the activities of the Underwriting Committee. Scope of Power and Duties of the Underwriting Committee To consider and approve the securities that include both debt and equity instruments the Company will act as lead underwriter or co-underwriter by considering Authorisation for Placement & Underwriting Commitment Form that includes details about characteristics of instruments, business nature and operation of issuers as prepared by the Investment Banking Department: To consider and approve the Company’s acting as the lead underwriter or co-lead underwriter. The majority of members of the Underwriting Committee must approve and vote for the transaction prior to the Company’s acting as the lead underwriter or co-lead underwriter: To consider the impact of the Company’ commitment to firm underwriting of securities on financial risk, liquidity and Net Capital Rule (NCR) to ensure the Company’s NCR will not fall below the level required the SEC: To establish guidelines for appropriate allocation of securities the Company acts as underwriter to local sales, institutional sales and investment banking departments: To perform any acts as designated by the Management Committee.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ The Underwriting Committee does not have the power to approve any transactions or matters where there is a conflict of interest with the Company or its subsidiary (if any). Disclosure of transactions with conflict of interest must be made to the Board of Directors for consideration.

5.3 The Risk Management Committee The Risk Management Committee was set up in accordance with the Board of Directors’ resolution no. 7/2005 held on July 14, 2005. Its members consist of the Company’s directors and management as follows: 1. 2. 3. 4. 5. 6.

Name Title Mr. Supachai Ekkul Acting Chairman of the Risk Management Committee Mr. Judd Clark Kinne Member of the Risk Management Committee Ms. Chao Tse Yang Member of the Risk Management Committee Mr. Pusit Kaewmongkolsri Member of the Risk Management Committee Mr. Ong Cheow Kheng Member of the Risk Management Committee Mr. Supawee Chongaroonngamsang Member of the Risk Management Committee

Scope of Duties and Responsibility of the Risk Management Committee The Risk Management Committee’s duties and responsibilities are as follows: 1. To designate a person(s) with authority to grant credit line approval as well as the authority to do so; 2.

To consider and approve operation of business in accordance with specific credit manuals;

3.

To consider deviation in various matters as well as authorised persons;

4.

To consider other issues related to the Company’s risk factors as assigned by the Board of Directors.

The Risk Management Committee also has authority in the following areas: 1. To determine and review policies, guidelines, procedures in regard to managing all risk factors affecting the Company’s operating performance such as credit risk, market risk, operational risk etc; 2. To consider and approve credit line for securities trading and investment in financial instruments such as Futures and Option and review such amount of credit line; 3. To consider and make a decision on disputed amount of credit line in accordance with normal approval procedures; 4. To identify and specify list of highly risky securities as well as additional conditions clients need to fulfill prior to submission of trading orders for such securities; 5. To consider and approve any exceptional cases in relation to risk management issues.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ In 2007, the Risk Management Committee held 3 meetings, with details as follows:

1. 2. 3. 4. 5. 6.

Name Mr. Supachai Ekkul Mr. Judd Clark Kinne Ms. Chao Tse Yang Mr. Pusit Kaewmongkolsri Mr. Ong Cheow Kheng Mr. Supawee Chongaroonngamsang

Number of Attendance 3 3 3 3 3 3

5.4 The Good Corporate Governance Committee The Good Corporate Governance Committee was set up in accordance with the resolution of the Board of Directors’ meeting No.6/2006 held on November 18, 2007. The Good Corporate Governance Committee consists of the members as follows: Name 1. Mr. Yuth Vorachattarn 2. Dr. Preecha Jarunggidanan 3. Dr. Paiboon Sareewiwatthana 4. Mr. Montree Sornpaisarn 5. Mr. Waranchai Janesiriwanich

Title Chair of the Good Corporate Governance Committee Member of the Committee Member of the Committee Member of the Committee Secretary of the Committee

Scope of Duties and Responsibilities of the Good Corporate Governance Committee 1. Determine good corporate governance principles and business ethics & professional conducts of directors, executives and employees; 2. Monitor, evaluate the result of conformance with good corporate governance principles and business ethics & professional conduct by of directors, executives and employees and provide any suggestions regarding such matters; 3. Arrange any activities to encourage directors, executives and employees to understand more about good corporate principles and realise the necessity to conform with specified business ethics and professional conduct; 4. To ensure full and fair disclosure of conformance with good corporate governance principles in the Company’s annual report. In the year 2007, the Good Corporate Governance Committee held one meeting with details as follows: Meeting No. Date 1/2007 3/12/2007

Mr.Yuth Dr.Preecha Dr.Paiboon Mr.Montree Vorachattarn Jarunggidanan Sareewiwatthana Sornpaisarn 3 3 3 3

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♦Market and Business Condition♦ ♦Annual Report 2007♦ 6. Management As of December 31, 2007, the Company has 11 members of management as follows: Name Title 1. Mr. Montree Sornpaisarn Chief Executive Officer 2. Mr. Pusit Kaewmongkolsri Chief Operating Officer Acting Chief Financial Officer 3. Mr. Supachai Ekkul Managing Director, Risk Management and Credit Control Department 4. Mrs. Boonporn Boriboonsongsilp Managing Director, Local Securities Clients 1 5. Mr. Vikas Chandra Kawatra Managing Director, Foreign Institution Sales Department 6. Ms. Aim-On Pinthawiruth Senior Vice President, Accounting Department 7. Ms. Wimol Chaipatikarn Vice President, Finance Department Management who are not under SEC definition Name 8. Mr. Kosit Boonroungkaw 9. Mr. Ong Cheow Kheng 10. Mr. Wanchai Tanjasiri 11. Mr. George Huebsch

Title Deputy Managing Director, Local Securities Clients 2 Adviser and Member of the Management Committee Assistant Managing Director, Business Development and Technical Analysis Department Executive Vice President, Research Department

7. Management Compensation A. Monetary Compensation Director’s Compensation Director’s compensation has been determined on a fair and reasonable basis. The Remuneration Committee reviewed director’s compensation, taking into account responsibility of each director, the Company’s financial condition as well as level of compensation paid relative to those made by other companies in the same industry. Director’s compensation consisted of meeting allowance and gratuity that were authorised and approved by the shareholders’ meeting. For the year ended December 31, 2007, the Company’s Board of Directors was comprised of 9 directors, and the Company made compensation to all directors in the form of meeting allowances in the total amount of Baht 3,600,000 and a director gratuity for a total amount of Baht 35,000,000. For the total amount of director gratuity, Baht 5,000,000 of which was made to 3 members of the Audit Committee, and the remaining amount was made to other directors. Details of director’s compensation are as follows:

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♦Market and Business Condition♦ ♦Annual Report 2007♦

1. Mr. Yuth Vorachattarn 2.. Mr. Ronald Anthony Ooi Thean Yat 3. Mr. Montree Sornpaisarn 4.. Mr. Judd Clark Kinne 5.. Mr. Hwang Wei-Cherng 6.. Mr. Pusit Keawmongkolsri 7.. Ms. Chao Tse Yang 8. Dr. Preecha Jarunggidanan 9.. Dr. Paiboon Sareewiwatthana Total

Compensation for the Year 2007 2,400,000 600,000 600,000 3,600,000

Unit: Baht Gratuity for the Year 2007 2,200,000 7,500,000 7,500,000 7,500,000 7,500,000 1,400,000 1,400,000 35,000,000

Management’s Compensation For the year 2007 ended December 31, 2007, the Company made compensation to 6 management (under the SEC definition) (excluding Senior Vice President of the Accounting Department and the Finance Department) and Mr. Ong Cheow Kheng (as a member of the Management Committee) in the form of salary and bonus for the total amount of Baht 102.58 million and contribution to the provident fund for a total amount of Baht 0.75 million. Other Compensation The Company’s extraordinary shareholders’ meeting held on December 6, 2005 reached a resolution to approve the issuance and grant of warrants in the total amount of 27,250,000 units to the Company’s directors and employees (with an exercise ratio of 1:1 and an exercise price of Baht 7 a share). Grantees could exercise warrants on the last business day of each month, commencing in August 2006.

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♦Market and Business Condition♦ ♦Annual Report 2007♦ The outstanding amount of warrants granted to each director as at December 31, 2007 are as follows: Director Name

1. Mr. Yuth Vorachattarn 2. Mr. Ronald Anthony Ooi Thean Yat 3. Mr. Hwang Wei-Cherng 4. Mr. Judd Clark Kinne 5. Mr. Montree Sornpaisarn 6. Mr. Pusit Keawmongkolsri 7. Ms. Chao Tse Yang 8. Dr. Preecha Jarunggidanan 9. Dr. Paiboon Sareewiwatthana Total

The Outstanding Amount of Warrants Granted as at December 31, 2007 (Unit)

Number of Warrants Exercised during the Year 2007

70,000 343,800 343,800 343,800 343,800 343,800 343,800 50,000 27,500 2,210,300

15,000 281,200 281,200 281,200 251,200 258,700 281,200 22,500 1,672,200

8. Corporate Governance The Board of Directors has a policy to adhere strictly to the Code of Best Practices for Directors of Listed Company as prescribed by the Stock Exchange of Thailand. The Company applies Principles of Good Corporate Governance throughout the organisation. It also set up good corporate governance culture starting by providing knowledge and understanding of good corporate governance to employees through various means so that the employees will realize the importance of such culture and integrate them into their work to ensure transparency and standardisation. This will be a basic principle before moving on to further development. The Company’s progress in implementing good corporate governance will be evaluated periodically.

9.

Protection of Usage of Inside Information The Company has a policy to prohibit management from using inside information regarding its operation result and financial condition yet to be disclosed to the public for securities trading and for their own interests. The Company informed its management their obligations in regard to disclosure of their holdings of securities of the Company in accordance with Section 59 and penalties as set out in Section 275 of the SEC Act B.E. 2535 As well, the Company also implemented other preventive measures with regard to usage of inside information including: 1. The Compliance Department will closely check and monitor Investment Banking Department Staffs (IB Staffs) possessing material nonpublic information yet to be disclosed to the public. Names of the clients’ firms to which such sensitive information belongs will be put under “Watch List”. As well, any IB staffs who possess material nonpublic information regarding their corporate clients are prohibited from divulging

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♦Market and Business Condition♦ ♦Annual Report 2007♦ such information to outsiders and trading on such securities (in case corporate clients are listed firms). 2. In case the Company acts as the financial advisor for public offering of shares or for acquiring listed firms, names of client firms will be notified to the Compliance Department, and all IB staff will be prohibited from trading securities of such client firms. 3. The Company has a policy to put a “Chinese Wall” between the Investment Banking Department and other departments. IB staff are prohibited from divulging nonpublic information regarding corporate clients to securities marketing officers and securities research staff prior to an appropriate time. 4. In case the Company’s Research Department has prepared research reports based on interviews with listed firms’ management, the Compliance Department will put the names of listed firms for which the Research Department has prepared research reports under a “Watch List” to check whether any involved persons take advantage of inside information. 5. In case the Research Department has prepared research reports for any listed firms, the Compliance Department will put the names of listed firms for which the Research Department has prepared research reports under “Restricted List”, and all the Company’s staff will be prohibited from trading such securities three days prior to public dissemination of such reports. 6. The Company’s management are required to disclose their holdings of securities of the Company in accordance with Section 59 and penalties as set out in Section 275 of the SEC Act B.E. 2535 7. Any Company’s management or departments who obtain inside information regarding the Company are prohibited from divulging such information to outsiders or uninvolved persons, and from trading in the Company’s securities one month prior to public dissemination of the Company’s financial statements.

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♦Committees and Management Structure♦ ♦Annual Report 2007♦ •

Personal Data of the Company’s Directors and Management

Board of Directors Name and

Age

Education

Position at the Company

1. Mr. Yuth Vorachattarn Chairman and Chairman of the Audit Committee

59

Master Degree in Economics, Thammasat University

% of Share Holding as of Dec 31, 2007 (Change in No. of Shares Held during the Year

Family Relationship among management

Period

0.033 (30,000 shares)

None

Oct.2002-present

Jul.03-present Jul 2003-present

Bachelor Degree in Economics, Thammasat University

Jul04 - present

The Thai Institute of Directors Association: DCP #0

Jul.05-present Aug.02- present Jul. 01- Mar.02 Jan.00-Jul.01 Feb.99-Jan 00

2. Mr. Ronald Ooi Thean Yat Director

55

Certified Public Accountant, The Institute of Chartered Accountants.

None (281,200 shares)

None

Aug. 98-present 1989-present

Work Experiences Position and Company

Chairman and Member of the Audit Committee, Kim Eng Securities (Thailand) Plc. Chairman, Siam Panich Leasing Plc. Chairman, Siam Panich Leasing Plc. Chairman, Preecha Group Plc. Chairman of the Audit Committee Saha Thai Steel Pipe Plc. Chairman, Family Know How Co., Ltd. Managing Director, Bangkok Metropolitan Bank. Manager, MAI. ASVP, Government Savings Bank.

Director, Kim Eng Securities (Thailand) Plc. Director, Kim Eng Holdings Limited.

Bachelor of Economics, University of New England, Australia

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♦Committees and Management Structure♦ ♦Annual Report 2007♦ Name and

Age

Education

Position at the Company

3. Mr. Wei Cherng Hwang Authorized Director

45

MBA (Finance), University of California, Riverside, USA

% of Share Holding as of Dec 31, 2007 (Change in No. of Shares Held during the Year

Family Relationship among management

None (281,200 shares)

None

Period

Oct.02-present Oct.03-present June 2001-present

4. Mr. Judd Clake Kinne Authorized Director

63

Master of International Management

0.179 (281,200 shares)

None

Nov 06-present Nov 05- present

American Graduate School of International Management, Glendale, Arizona, USA

5. Ms. Chao Tse Yang Director

45

Financial Laws Cathalic University

Nov.02-present

Jan.89-Feb.98

None (281,200 shares)

None

Mar 05 - present May 04 - present

International Administration Central Michigan University

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Work Experiences Position and Company

Director Kim Eng Securities (Thailand) Plc. Director Yuanta Securities Asia Financial Service Limited Director Yuanta Core Pacific Securities (Hongkok) Company Limited Director Kim Eng Holdings Limited

Director, Kim Eng Securities (Thailand) Plc. Director, KE Strategic Pte Ltd Director, Kim Eng Holdings Limited Peregrine Securities Singapore Pte. Ltd.

Director, Kim Eng Securities (Thailand) Plc. Director, ATR Kim Eng Financial Corporation Director, ATR-Kim Eng Capital Partners Inc.

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♦Committees and Management Structure♦ ♦Annual Report 2007♦ Name and

Age

Education

Position at the Company

6. Mr. Montree Sornpaisarn Chief Executive Officer and Authorized Director

44

Chartered Financial Analyst (CFA)

% of Share Holding as of Dec 31, 2007 (Change in No. of Shares Held during the Year

Family Relationship among management

0.068 (500,000 shares)

None

Period

Oct.01-present May 05-present

MBA (Finance), Thammasat Univesity

Feb.00-Sept.01

Bachelor Degree in Engineering, Chulalongkorn University

Sept.98-Jan.43

Work Experiences Position and Company

Director and Chief Executive Officer, Kim Eng Securities (Thailand) Plc. Management Director, Association of Securities Companies Managing Director (Investment Banking), Vickers Ballas (Thailand) Ltd. SVP, Investment Banking, SG Asia Finance and Securitieis Company Plc.

The Thai Institute of Directors Association: DAP #21/2004 7. Mr. Pusit Kaewmongkolsri Chief Operating Officer, Acting Chief Financial Officer, Authorized Director

46

Master Degree in MIS, West Coast University. USA.

0.004 (236,200 shares)

None

Jan. 03.-present 1998-July 02

Director and Chief Operating Officer, Kim Eng Securities (Thailand) Plc. Director, DBS Vickers (Thailand)

Bachelor Degree in Accounting, Chulalongkorn University The Thai Institute of Directors Association: DAP #11/2004

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♦Committees and Management Structure♦ ♦Annual Report 2007♦ Name and

Age

Education

Position at the Company

8. Dr. Preecha Jarungidanan Director and Audit Committee Member

62

Ph. D in Economics, University of MissouriColumbia, USA.

% of Share Holding as of Dec 31, 2007 (Change in No. of Shares Held during the Year

Family Relationship among management

None (-)

None

Period

Oct.02-present April 03- present

Master of Economics, California State University, Long Beach, USA.

Present

Bachelor of Economics, Thammasat University

March 01-present

Work Experiences Position and Company

Director and Audit Committee Member, Kim Eng Securities (Thailand) Plc. Independent Director, Thamniti Co., Ltd. Small Business Credit Guarantee Corporation Director The Public Sector Development Commission Expert in Business Economic, NIDA

The Thai Institute of Directors Association: DAP #9/2004

9. Dr. Paiboon Sareewiwatthana Director and member of the Audit Committee

54

Ph. D in Finance, University of Mississippi, USA.

0.004 (-)

None

Feb.01-present

The Thai Institute of Directors Association: DCP #12/2001

1984 – present

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Director and Chairman of Audit Committee, Kim Eng Securities (Thailand) Plc. Member of the Audit Committee, Team Precision, Plc. Professor Level 9, NIDA

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♦Market and Business Conditions♦ ♦Annual Report 2007♦ Market and Business Conditions ♦ Brokerage Business The Thai equity market in 2007 was primarily influenced by external factors, while local sentiment was supported by positive domestic political developments and steadily improving economic growth. The SET index gained 26.22% in 2007 to close the year at 858.10. The index peaked on October 29 at an 11-year high of 915.03. The Thai stock market made steady gains in the first seven months of the year after a dim start as the Bank of Thailand implemented harsh capital controls aimed at stemming the appreciation of the baht from foreign fund inflows, as well as domestic political concerns at the end of the Thaksin Shinawatra administration after the coup d’etat in September 2006. . During this seven-month period, foreign investors were net buyers of Thai equities by 127.60 billion baht. Driven by excess liquidity in global equity markets, regional and major overseas markets were experiencing similar or even more impressive gains with many hitting historical highs. The shine on global equity markets began to dim after mid-year due to concern that the SubPrime crisis would threaten to drag down the U.S. economy. Although Asian banks were not caught holding a significant portion of rapidly devaluing mortgaged-backed collateralised debt obligations, the slowdown in the U.S. economy would have an adverse impact on liquidity in the global capital market and export-oriented Asian economies stood to be hurt by declining U.S. economic growth slowing export demand. Local sentiment, however, steadily improved during the course of the year with the passage of the new constitution in Thailand’s first-ever national referendum on August 19 and the general election on December 23. Economic growth gradually picked up during 2007, largely from continuing strong exports and steady improvement in both domestic consumption and investment. According to preliminary estimates from the National Economic and Social Development Board, quarterly GDP rose from 4.16% year-on-year in 1Q07 to 4.26% in 2Q07 and 4.94% in 3Q07. If 4Q07 economic growth comes in at 5.00% as expected, full-year 2007 GDP growth should be around 4.60%. Thai exports in 2007 grew by a surprisingly strong 18.14%. Rapid year-on-year growth in export demand from China, India and the petrol-dollar rich Middle East of 26.51%, 47.20% and 29.96% respectively more than offset the 1.20% decline in demand from the U.S. With domestic demand still sluggish, imports grew at a much slower rate of 9.63% year-onyear, leading to a 2007 trade surplus of US$11,973 million, a current account surplus of US$13,261 million and a balance of payments surplus of US$14,923million and a balance of payments surplus of US$17,102 million. The Bank of Thailand’s Monetary Policy Committee (MPC) took decisive and early steps in 2007 to boost domestic demand, lowering its one-day repurchase rate by 175 basis points from January to July last year to 3.25%. The MPC maintained its benchmark rate at this level in three subsequent policy meetings in 2007, due, in part, to fears of inflationary pressure from rising global crude prices. Pages 37

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♦Market and Business Conditions♦ ♦Annual Report 2007♦ Global crude prices steadily rose in 2007, closing the year at US$95/barrel, up 58% year-onyear. The inflationary impact from higher energy prices became more evident near year-end as headline inflation increased 3.21% year-on-year in December, while core inflation was up 1.24%. The other major concern has been the appreciating baht against the dollar. In the onshore market, the baht rose 6.9% against the dollar in 2007 to Baht 33.65/US$1. This follows the 8.5% appreciation of the baht/dollar exchange rate in 2006. Local concerns in the first half of the year due to political factors and external factors in the second half of the year effectively stalled new listings in 2007. Total stock market listings for equity shares increased by only 7 companies for the SET and 6 for the MAI in the year 2007. Corporate activity in Thailand was relatively subdued given external risks. Many listed companies instead returned funds to shareholders through higher dividend payouts. According to the Stock Exchange of Thailand, the dividend yield on shares at the end of 2007 was an attractive 3.31%. Trading volume was still low, with average daily trading value increasing only 6.79% yearon-year to Baht 17,436 million. Foreign investors accounted for 32.95% of total transactions on the Thai stock market, compared to 52.54% for local retail investors and 14.51% for local institutions. After net selling Baht 72.59 billion in the final five months of the year, foreign investors in 2007 were net buyers by Baht 55.02 billion. Due to the higher portion of foreign stock trading activity and relatively slower growth of retail trading, the Company’s market share in 2007 was 8.10%, down from the previous year’s 8.57%. ♦ Business of Trading Debt Instruments Trading activities of debt instruments in the secondary market in the year 2007 increased compared with those in 2006, with the total trading volume of Baht 9.74 trillion, or the average daily trading volume of Baht 42.7 billion. Most of trading activities of debt instruments in the secondary market involved government bonds. Trading volume of government bonds accounted for 98.59 % of total trading volume in the secondary market in the year 2007. Trading volumes of different types of debt instruments on the descending order are as follows: No.1 is Government Debt Securities (mostly BOT Bonds with the total trading volume of Baht 7.73 trillion). The second is Government Bonds, with the total trading volume of Baht 1.06 trillion. The third is T-bills, with the total trading volume of Baht 747 billion. That is followed by Corporate Debentures, with the total trading volume of Baht 130 billion. Total trading volume of state enterprise bond stood at Baht 69.4 billion, a decline by 15.50 % from that in the year 2006. Total trading volume of foreign bonds in 2007 stood at Baht 7.34 billion, an increase by 394.34 % from that in the year 2006. The total amount of Baht-denominated debt issued in the domestic market in the year 2007 reached Baht 5.78 trillion, an increase by 122.06% compared with that in the preceding year. 81.05% of debt securities in the domestic primary market in the year 2007 were issued by the government sector, including T-bills, Government Bonds, Government-related Entity Bonds and State Enterprise Bonds. In the year 2007, the corporate sector issued new debt (including shortPages 38

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♦Market and Business Conditions♦ ♦Annual Report 2007♦ term debt instruments such as commercial paper) for the amount of Baht 1,087 trillion, an increase by 50.87 % from that in the year 2006. The real sector that issued the highest amount of corporate debentures in 2007 was the banking sector, followed by the energy sector, the insurance sector, the telecommunication sector, the real estate & housing sector, the construction sector and the transportation sector. Total amount of Baht-denominated foreign bonds stood at Baht 7.4 billion. ♦ Financial Advisory and Securities Underwriting Business The overall Thai economy in the year 2007 experienced satisfactory growth, especially in Q3 with a growth rate of 4.9 %. This made the economic growth rate during the first three quarters of 2006 stand at 4.5 %. In 2007, Thailand faced many negative factors that had an adverse impact on the domestic economic growth, namely domestic political uncertainty, rising crude oil prices in the global market since the beginning of the year, the Sub-Prime Crisis in the US and sluggish domestic consumption and investment activities. The total amount of equity issuance in the year continued to decelerate. In 2007, there were only 13 new listings, with the total amount of funds raised of Baht 18,693.00 million. In 2007, there were 7 new listings on the SET, with the total amount of fund raising of Baht 17,929.00 million, and 6 new listings on the MAI, with the total amount of fund raised of Baht 764.00 million. As of December 31, 2007, there were a total of 475 SET-listed and 48 MAI-listed firms. In the year, KEST acted as a co-underwriter and sub-underwriter for some investment funds and also joined the founder’s group of the first-ever Exchange Traded Funds (ETF) in Thailand, with the SET 50 Index as the reference index. This ETF is called TDEX. KEST also engaged in the financial advisory business. It acted as the financial advisor in share valuation, the independent financial advisor in an M & A transaction and the financial advisor in a successful IPP bid.

♦ The Derivatives Agent Business The Company was granted by the Ministry of Finance a license to operate business as a derivatives agent in accordance with the Derivatives Act B.E. 2546 (2003). As a derivatives agent, the Company is allowed to obtain from and submit on behalf of their clients trading orders to the Derivatives Exchange. It was selected as one of the first twenty members of both Thailand Futures Exchange (TFEX) that was launched on April 28, 2006 to provide services of trading derivatives to individual and institutional clients and Thailand Clearing House (TCH) that has provided services related to the registering, clearing and settling of transactions executed on the exchange, the guaranteeing of contracts and the managing of risks of its members. For the Year 2007, the total transaction volume on TFEX was 1,236,884 contracts, representing the total transaction value of Baht 706,318 million. The average daily transaction volume of SET 50 Index Futures in the year was 5,049 contracts, an increase of fourfold compared with that in 2006 that was 1,024 contracts. For the new product, namely SET 50 Index Options that were launched on October 29, 2007, the average daily transaction volume was 206 contracts. Investors in the derivatives market could be classified into three groups, namely domestic individual investors that accounted for 55% of total transaction volume, domestic institutional investors that accounted for 25% of total transaction volume and foreign institutional investors that accounted for 20% of total transaction volume. For 2007, the total transaction volume for derivatives contracts traded via the Company was 271,464, representing the total

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♦Market and Business Conditions♦ ♦Annual Report 2007♦ transaction value of Baht 156,754 million that accounted for approximately 11% of total transaction value in the market. The Company has long emphasized expanding its investor base in the derivatives market. It has continuously provided variety of training courses related to derivatives instruments to its clients and general investors. This is because the Company has long realized that its long-term success in the derivatives business depends upon investors’ knowledge and understanding in derivatives trading strategies, return & risk related to derivatives investment and their abilities to apply derivatives instruments for investing and hedging purposes. The Company aims to grow concurrently with continuous expansion in its investor and client bases. The Company will continue to prepare and publicize daily research related to derivatives and their investment strategies in both visual and audio forms via KELIVE TV to which clients can access via the Internet. In addition, to enhance investors’ knowledge and understanding in SET 50 Index Options, the Company has produced and given to its clients a video CD, titled “SET 50 Index Options” as a tool for self-study.

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♦Risk Factures♦ ♦Annual Report 2007♦ Risk Factors •

Fluctuations in the conditions of international and domestic economies, money markets and capital markets could materially affect the Company’s revenue.

Brokerage fees from securities and derivatives businesses that have been KEST’s major source of revenue are directly related with economic condition, movements of money and capital markets, trading volume on the Stock Exchange of Thailand (SET) and investor confidence, all of which are the factors that have been beyond control of the Company. For the years 2004, 2005 and 2006, average daily trading values on the SET were Baht 20,508 million, Baht 16,601 million and Baht 16,327 million, respectively. In 2007, the average daily trading value on the SET was Baht 17,436 million, an increase of 6.79 % compared with that of 2006. This was because in the second half of the year 2007 many negative factors affecting market sentiment turned clear and more positive and this helped to boost investor confidence. In 2005, 2006 and 2007, KEST’s brokerage fees from securities and derivatives businesses stood at Baht 2,024.74 million, Baht 1,645.15 million and Baht 1,618.63 million, respectively. Fluctuations in the economy, the money market and the capital market may be caused by a large number of factors that are beyond control of KEST, including civil unrest in the three most southern provinces of Thailand and political uncertainties. Such factors would negatively affect confidence of both domestic and foreign investors and, as a consequence, may adversely affect the volume of trading on the SET and the MAI, including the amount of funds to be raised and the number of new listings on the SET and the MAI. This could have a material adverse effect on KEST’s business, financial condition and result of operation. KEST has mitigated such risk by providing some parts of compensation made to marketing officers and securities traders that vary with trading volume on the SET to reduce its fixed operating costs, expanding its brokerage client base to include both individual and institutional clients and generating revenue from variety of financial advisory services including securities offering, M & A, business takeovers, project feasibility studies, business valuation and securities underwriting. KEST also engages in other businesses to generate additional sources of revenue such as asset management, private fund management and securities borrowing & lending (SBL). •

The Company operates in a highly competitive business.

The securities business in Thailand is a highly competitive, especially in the area securities brokerage that has generated a major portion of KEST’s operating revenue. The Stock Exchange of Thailand (“the SET”) changed the structure of securities brokerage commissions by specifying the minimum brokerage rate of 0.25% of total brokerage transaction value, effective from January 14, 2002 until January 13, 2007. Later on December 25, 2006, the SET approved a temporary extension of the current minimum securities brokerage fee for another five years. Such extension period can be divided into two sub-periods. For the first three years (Jan 1, 2007-Dec 31, 2009), the minimum securities brokerage fee of 0.25% remains in effect. For the next two years (Jan 1, 2010-Dec 31, 2011), the calculation of securities brokerage fee will be based upon a sliding scale methodology in which securities brokerage rate to be applied will move in the opposite direction to securities trading transaction size. Thus, for the period between Jan 1, 2007-Dec 31, 2011, securities brokerage houses in Thailand will compete with one another on the Pages 41

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♦Risk Factures♦ ♦Annual Report 2007♦ basis of quality of services rather than securities brokerage fees. Nevertheless, competition in terms of service quality still exists, especially in the area of Internet trading. This is because brokerage fees for Internet trading are lower than regular fees (Brokerage fees for Internet trading are 60% of regular fees). KEST has long focused on providing high-quality services with the aim to maintaining and expanding the existing client base. KEST has done so by increasing the quality of research publications, improving and developing skills and capabilities of staff in providing services and recommendations to clients. The Company has continuously upgraded its information system to well respond and satisfy fast-changing client needs. All of these have enabled the Company to be in a good position and well prepared for liberalisation of the brokerage commission structure that will be effective on January 1, 2012, and thus intensify competition in the securities brokerage industry. Financial advisory and investment banking services and fees have also been competitive in terms of both service quality and advisory fee levels. KEST has provided variety of financial advisory services including securities offering, independent financial advisory, fund raising, M & A, business takeovers, business valuations etc, focusing on provision of high-quality services. The Company has continuously developed and upgraded advisory skills of its IB staff, and this enables it to provide high-quality financial advisory services to clients on a continuous basis. KEST was also granted a license to operate business as a derivatives agent in accordance with the Derivatives Act B.E. 2546. It was selected as a member of Thailand Futures Exchange (TFEX) that was launched on April 28, 2006 and Thailand Clearing House (TCH) to operate business as a derivatives agent. This has helped to expand the Company’s source of revenue. •

In its securities brokerage business, the Company is highly dependent on a small number of large clients.

The Company’s top 10 trading clients accounted for 32.33% of total securities brokerage fee income in the year 2006 and 25.75% in 2007. Had KEST lost such big trading clients, its securities brokerage fees for 2006 and 2007 would have fallen by 33.26% and 27.16%, respectively. However, one of the Company’s top 10 trading clients was the Kim Eng Holdings Group that is also the major shareholder. Thus, it is quite unlikely that it will lose such a client. As KEST has long realised concentration risks, it has thus aimed to increase the number of trading accounts in order to expand its client base. For the year ended December 31, 2006 and 2007, the total number of KEST’s client trading accounts was 55,600 and 58,400, respectively. For 2007, 81.14% of the Company’s securities brokerage fees were from retail trading business and the remainder from local and foreign institutions. Another source of the Company’s operating revenue was from financial advisory and securities underwriting businesses that generated total revenue of Baht 22.85 million, a decline of 60.36 % from the 2006 level. This has helped to generate another source of operating revenue for the Company and allowed it to rely less on securities brokerage business. •

Clients may default or delay payment for or transfer of securities and collateral for taking position in futures

For the year ending December 31, 2007, the Company’s securities brokerage receivables totaled Baht 3,391.36 million, consisting of clients’ accounts of Baht 1,417.01 million, margin loans of Baht 1,693.95 million and other receivables of Baht 280.41 million, with unearned interest revenue of Baht 25.85 million. It classified such securities and derivatives brokerage receivables as doubtful debt in the amount of Baht 298.59 million, accounting for 8.72% of its Pages 42

KIM ENG SECURITIES (THAILAND) PLC

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♦Risk Factures♦ ♦Annual Report 2007♦ total securities and derivatives brokerage receivables. Of the total amount of doubtful debt, Baht 291.86 million, of which belonged to Nithiphat Securities Co., Ltd., was incurred prior to acquisition of the ordinary shares of that company by Kim Eng Holdings Limited in 1998, and Baht 6.73 million of which was incurred after the share acquisition by Kim Eng Holdings. The Company tries to collect all doubtful debts as fast as possible, and if it cannot do so, it will file a lawsuit against the defaulting receivables. For the total doubtful debt of Baht 298.59 million, Baht 15.67 and 282.92 million of which were classified as substandard and doubtful debts. The Company established an allowance for doubtful debt in the total amount of Baht 298.49 million, or 100% of the total doubtful debt. In the derivatives agent business, the Company may face the risk that collateral clients put up may not be sufficient to satisfy their debt obligations with TCH. Thus, KEST, as a derivatives agent, is obligated to follow and collect more collateral from clients to satisfy debts incurred as a result of loss from holding a position in futures. Nevertheless, KEST has implemented many policies aimed to mitigate default risk as a result of securities and derivatives trading. It has done so by focusing on selecting high-quality clients and specifying trading limits for securities and derivatives that well correspond to securities collateral amount, clients’ financial status, their abilities to repay debts, liquidity conditions and investment experience. KEST has regularly reviewed and closely monitored the receivables’ status. •

Any failure in computer systems may disrupt the Company’s securities brokerage business operations

To operate its securities brokerage business, the Company relies heavily on its computer systems. Main computer systems that have supported the Company’s operation of securities trading are comprised of 1) HiTrade that is connected to the SET for securities trading on a realtime basis. It enables securities marketing officers and clients to closely monitor share price movement, to submit trading orders and check trading order status. HiTrade is connected to the Internet, thus allowing clients to monitor share price movement and submit trading orders via the Internet as well. 2) The computer system that is connected to TFEX and enables securities marketing officers to submit trading orders for futures contracts on behalf of their clients and the computer system that is connected to SET Trade that allows clients to submit their trading orders via the Internet. 3) Share settlement systems for transactions between clients and TSD, namely the Securities Back Office Automation, or SBA. If the Company’s computer systems fail, the operation of the Company in the securities brokerage service will be materially affected. To mitigate such risk, the Company set up a backup system as well as back ups of important information, both of which enable the Company to operate smoothly in case of a failure of the main system. To connect the main office’s computer system and those of the branch offices, the Company has a back up leased line that can switch when the leased-line fails. As well, the Company has a contingency plan that allows the use of a back-up computer system when contingency plans are implemented.

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KIM ENG SECURITIES (THAILAND) PLC

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♦Risk Factures♦ ♦Annual Report 2007♦ •

As an underwriter, the Company is required to subscribe for unsubscribed securities that may expose it to large losses

In relation to investment banking business in which the Company acts as an underwriter, it assumes an underwriting risk that may require it to purchase any unsubscribed securities for its own account. This may be due to inappropriate pricing and fluctuations in both money and capital markets. If, in the future, the Company is required to purchase underwritten securities for its own account, it may result in significant losses that could have a material adverse effect on its financial condition, particularly the net capital ratio, and its results on operations. To mitigate this risk, prior to participating as an underwriter for any securities, the Company conducts a study and analysis of the business potential of issuers as well as client interest, and the Company will act as underwriter for securities only with minimal risk of securities under subscription. In case the Company acts as underwriter for securities at significant amounts, approval for securities underwriting from the Underwriting Committee needs to be obtained prior to the Company’s acting as underwriter. In acting as underwriter and/or financial advisor, the Company has put emphasis on selecting clients. Prior to accepting any new clients, the Company will conduct a preliminary assessment and due diligence on the business potential as well as financial performance of the clients. The Company’s IB staff are well accustomed with relevant applicable law and regulations, and this enables them to provide high-quality and accurate services to clients. •

The Company’s business may be affected by an error or the misconduct of an employee that is difficult to check and prevent

The Company’s business is highly dependent upon its reputation and the trust of its clients. Employees are regularly in direct contact with clients and have knowledge of, or access to, the clients’ assets or information. Accordingly, when an employee does not carry out his or her duties in accordance with a client’s orders or acts beyond his or her authority or does not act in compliance with the Company’s rules and regulations including its compliance manual or commits misconduct in managing clients’ assets or uses the clients’ information without permission or other actions that may harm client interests, the Company’s reputation and the trust of other clients may be adversely affected. The Company may also become liable for the losses incurred by the clients in question. In addition, certain actions may be made in breach of relevant laws or regulations and may result in the Company becoming liable to pay fines, losing its license or being subject to litigation, all of which may have a materially adverse effect on the Company’s financial condition and result of operations. To deal with this risk, the Company has regularly monitored working activities of employees and will punish any employee who violates these Company’s rules.

The Company operates its businesses under stringent laws and regulations, including regulations that impose liability on its operations that could have an adverse effect on its results of operations and financial condition

The securities business is strictly controlled by laws and regulations from government authorities, the Office of the SEC and the SET. As a result, any establishment or change of government policy or of the supervisory roles of the relevant regulatory bodies may affect the Pages 44

KIM ENG SECURITIES (THAILAND) PLC

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♦Risk Factures♦ ♦Annual Report 2007♦ Company’s goals, competitiveness and business and could have a materially adverse effect on the business, financial condition and result of operations of the Company. Moreover, the Company may incur liabilities resulting from the operation of its business, such as from mistakes arising from the performance of its duties as financial advisor or underwriter or from its failure to comply with steps in accepting securities purchase or sales orders from clients. The Company can not insure that if the Company became liable, it would not face serious liability or a possible business license risk, either of which could have serious a material effect on its business and its reputation. To mitigate this risk, the Company’s Internal Audit Department has closely monitored changes in laws and regulations relevant to the Company’s businesses, and will closely control and check operations of each department in the Company to ensure they are in conformance with applicable laws and regulations. It will inform of changes in relevant regulations to all involved departments.

The Company is highly dependent on staff

The Company relies on experienced, knowledgeable and skilled employees in its business operations. At present, in a highly competitive business, with a limited number of experienced and skilled staff, there is intense competition to recruit appropriate qualified staff. To the extent that the Company is unable to retain these staff, the Company’s business continuity may be affected to the detriment of its financial condition and result of operations. To counter this risk, the Company has provided its staff with good employee welfare, and long put emphasis on providing training courses for employees with the aim of enhancing employee skills. In addition, the Company has allocated warrants for staff in order to attract a very qualified workforce to continue working for the Company over the long term. •

The Company’s operations are under the control of the major shareholder

As at August 23, 2007, Kim Eng Holdings Limited, the Company’s major shareholder, held a 57.15% equity stake in the Company’s paid-up capital. Thus, Kim Eng Holdings Limited remains able to control shareholders’ resolutions in relation to key matters that are required by laws or articles of association of the Company to be passed by a majority vote of shareholders attending the meetings and entitled to vote, except for matters that are required by laws or articles of association of the Company to be passed by a three-fourths vote of shareholders. Therefore, other shareholders may not obtain sufficient votes to balance those of Kim Eng Holdings Limited. Nevertheless, the Company has appointed three independent directors that account for 30% of the Company’s Board of Directors. They are responsible for monitoring and providing advice on the Company’s operation to ensure it has operated transparently and accurately. Moreover, as a subsidiary of Kim Eng Holdings that has long been well known for its securities business with subsidiaries in Asia, Europe and the United States, KEST has been widely accepted by retail and institutional trading clients for its expertise and experience in the securities business.

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KIM ENG SECURITIES (THAILAND) PLC

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♦Audit Committee’s Report♦ ♦Annual Report 2007♦ Audit Committee’s Report The Audit Committee of Kim Eng Securities (Thailand) Plc., appointed by the Board of Directors, comprises of 3 independent directors qualified under the Stock Exchange of Thailand’s requirement. They are namely; Name Title 1. Dr. Paiboon Sareewiwatthana Chairman of the Audit Committee 2. Dr. Preecha Jarunggidanan Member of the Audit Committee 3. Mr. Yuth Vorachattarn Member of the Audit Committee For the year 2007, the Audit Committee held 8 meetings reviewing the Company’s operating performance and other activities as designated by the Board of Directors. All members of the Audit Committee participated in all meetings. The attendance details are as follows: Meeting Dr.Paiboon Sareewiwatthana

Dr.Preecha Jarunggidanan

Mr.Yuth Vorachattarn

30/01/2007

3

3

3

2/2007

30/03/2007

3

3

3

3/2007

30/04/2007

3

3

3

4/2007

29/06/2007

3

3

3

5/2007

31/07/2007

3

3

3

6/2007

27/09/2007

3

3

3

7/2007

31/10/2007

3

3

3

8/2007

03/12/2007

3

3

3

No.

Date of Meeting

1/2007

Auditor 3(Audited 2006 Financial Statements) 3(Reviewed Q.1/2007 Financial Statements) 3(Reviewed Q.2/2007 Financial Statements) 3(Reviewed Q.3/2007 Financial Statements) -

In certain important Audit Committee meetings, the Management and/or external auditors were invited to attend the meetings. The results from the meetings were reported to the Board of Directors. The major activities of the Audit Committee in the year 2006 were as follows: -

The Audit Committee reviewed and approved the internal audit plan for 2007. The Audit Committee gave recommendations and comments to the audit observation and provided guidelines for good corporate governance.

-

The Audit Committee evaluated the Company’s annual internal control system for completeness, acknowledged and monitored the audit results. The Audit Committee was satisfied with the Company’s internal audit program. All departments gave fullcooperation to the audit program. The Management fully supported the internal audit program and asked all departments to rectify weaknesses reported and as a result the Company’s operational effectiveness improved.

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KIM ENG SECURITIES (THAILAND) PLC

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♦Audit Committee’s Report♦ ♦Annual Report 2007♦ -

The Audit Committee reviewed the Company’s financial statements for the year 2006, Q1/2007, 6-months and Q3/2007 financial statements. The Audit Committee, together with the external auditor (PWC), evaluated the audit results according to general accounting principles to ensure accuracy, completeness, and adequacy of the disclosed statements. The external auditor also gave the opinion on areas for improvement.

-

The Audit Committee instructed the Company to conduct risk assessment based on the Risk-Based Approach (RBA) in general operations; information system; risk monitoring etc. to ensure all areas were properly operated. The Audit Committee verified the Company’s compliance with relevant securities & exchange regulations and evaluated the Company’s related party transactions to ensure they were conducted fairly and transparently. The Audit Committee reported their audit results regularly to the Board of Directors.

-

The Audit Committee managed important information disclosure about the Company, the Management and major events via the Company’s website (http://www.kimeng.co.th) for investors and interested general public. This is to support good corporate governance principles of the Company.

The Audit Committee has given the opinion that the Company compiled with the accounting standards as prescribed by the Association of Thai Accountants and regulations of the Stock Exchange of Thailand. The Audit Committee has closely monitored the Company’s operation to ensure transparency, which is consistent with good corporate governance. The Audit Committee ensured the Company has appropriate internal control systems. The Audit Committee found no material deficiencies in the Company’s operation and internal controls and systems, and this is consistent with the external auditor’s opinion. The Company has provided sufficient information to all shareholders and interested persons, emphasised on developing internal control system and audit to ensure maximum benefit to all shareholders and stakeholders.

Paiboon Sareewiwattana Chairman of the Audit Committee

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KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦Annual Report 2007♦ Financial Performance and Financial Information As of December 31, 2007, the company’s total assets stood at Baht 6,796.29 million, an increase by 23.24 % from December 31, 2006, thanks to increases in securities & derivatives receivables. This was because securities trading volume during the last three trading days of the year 2007 were higher than that of 2006. Apart from securities & derivatives receivables, the Company's other main assets included cash & cash equivalents that accounted for 31.01% of its total assets. The Company’s sources of funds consisted of liabilities for a total amount of Baht 2,623.61 million and shareholders’ equity of Baht 4,172.69 million. As at December 31, 2007, the Company’s debt-to-equity ratio (D/E Ratio) stood at 0.63 times, an increase from that on December 31, 2006 of 0.37 times. Most of the Company’s liabilities were in the form of securities and derivatives business payables that might vary in accordance with condition and situation in the securities & capital markets. Without taking into account liabilities in the form of securities and derivatives business payables, the Company’s D/E ratios as at December 31, 2005, 2006 and 2007 were at 0.11, 0.09 and 0.11 times, respectively. For the year 2007 beginning from Jan 1 to Dec 31, 2007, the Company had a total net profit of Baht 551.36 million, or an earnings of Baht 1 per share. Its net profit for the year 2007 slightly increased by 3.48 %, compared with that in 2006 of Baht 532.80 million, or an EPS of Baht 0.98. Despite an increase in the Company’s average daily trading value from Baht 2,810 million in the year 2006 to Baht 2,826 million in the year 2007. For the year 2007, the Company had a total brokerage fee income of Baht 1,618.63 million, a decline of Baht 26.52 million or 1.61% from that in 2006 of Baht 1,645.15 million. This was because some portion of the Company’s increasing average daily trading value was from Internet trading which earns a lower brokerage fee rate. Nevertheless, the Company was still able to retain its No.1 position in the securities brokerage business in terms of market share for the sixth consecutive year. In 2007, the Company had a market share of 8.10% in the securities brokerage business. Additionally, in 2007, the Company’s derivatives brokerage fee was Baht 89.54 million, an increase by Baht 73.94 million from that of Baht 15.60 million in the year 2006. This was because the Company’s average daily trading volume in derivatives contracts increased from 35,180 contracts in the year 2006 to 271,464 contracts in the year 2007. For 2007, the Company had total services and underwriting fees of Baht 24.64 million, a decline by 60.30% from Baht 62.06 million in 2006. Due to unfavorable conditions in capital markets caused mainly by deceleration in the domestic economic growth, a continual rise in global oil prices and inflation, many of the Company’s IPO clients decided to delay listings on the SET. The Company’s interest and dividend revenues declined by Baht 32.08 million, from Baht 170.65 million in 2006 to Baht 138.57 million in 2007. In the year 2007, the Company extended more margin loans and this helped to raise its interest revenue from margin loans from Baht 47.32 million in 2006 to Baht 62.38 million in 2007. The Company achieved return on equity (ROE) for 2005 and 2006 of 17.62% and 13.22%, respectively. For 2007, the ROE was 13.47 %. As the Company granted ESOP warrants to its directors, executives and employees, the total number of shares outstanding, determined on a fully diluted basis (assumed that all warrants are exercised), was 563,325,264 shares, and its fully diluted basic EPS for the year 2007 was Baht 0.98 a share. The weighted average number of shares outstanding for 2007 was 552,654,222 shares, and the Company’s basic EPS for the year 2007 was Baht 1.00 a share. In determining the Pages 48

KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦Annual Report 2007♦ Company’s fully diluted EPS, the Company’s increasing revenue and profit should also be taken into account. As at December 31, 2007, the Company had a total cash flow from operations of Baht 18.93 million. Its major portions of cash flow from operations were an increase in operating profit for the total amount of Baht 620.40 million, an increase in securities & derivatives business payables for the total amount of Baht 995.84 million and an increase in securities & derivatives business receivables for the total amount of Baht 1,643.10 million. The Company had total cash flows used in investing activities for the total amount of Baht 56.45 million. The cash flow was used mainly to buy computer equipment and to invest in a newly established subsidiary to engage in the asset management business. The Company had total cash flows used in financing activities for the total amount of Baht 398.47 million. A major portion of the cash flow was used in financing activities consisting dividend payments and proceeds from exercised warrants.

Summary of Financial Information •

Financial Statements

Total Assets Total Liabilities Total Shareholders’ Equity Securities & Derivatives Business Receivables Total Revenue Net Profit EPS (Baht) Weighted Average Number of Shares Outstanding (Thousands of Shares) **

2005 Jan-Dec 6,329,122 2,281,537 4,047,585

Unit: Thousands of Baht 2006 2007 Jan-Dec Jan-Dec 5,514,547 6,796,295 1,501,052 2,623,608 4,013,494 4,172,687

2,137,799

1,476,562*

3,126,765

2,355,550 714,978 1.31

1,970,406 532,799 0.95

1,971,159 551,359 0.98

545,000

560,292

569,325

Remark : * The Company first engaged in the derivatives business in 2006. ** The Company’s extraordinary shareholder’s meeting No.1//2005 held on December 6, 2005 approved the issuance of ESOP warrants to directors and/or employees, with the offering amount not to exceed 27.25 million units. Important features of the ESOP warrants include an offering price of Baht 0 a unit, the exercise price of Baht 7 a share, and the exercise ratio of 1:1. Warrant holders are entitled to exercise their warrants on the last business day of every month during the warrant tenure of 4 years. Warrant holders were first allowed to exercise their warrants on August 31, 2006.

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KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦Annual Report 2007♦ •

Financial Ratios 2005 Jan-Dec

2006 Jan-Dec

2007 Jan-Dec

Profitability Ratio Gross Profit Margin (%) Net Profit Margin (%) ROE (%) Return on Investment (%)

97.21 30.35 17.62 51.17

95.76 27.04 13.22 60.18

94.97 27.97 13.47 35.56

Efficiency Ratio Return on Assets (%) Total Assets Turnover (times)

11.04 0.36

9.00 0.33

8.96 0.32

Financial Ratio Liquid Assets to Total Assets (%) Earning Asset to Total Assets (%) Debt-to-Equity Ratio (times) Dividend Payout Ratio (%)

48.50 77.15 0.56 90

46.74 76.71 0.37 89

31.03 76.81 0.63 N/A

2.43 169.84

7.66 247.35

5.81 154.41

Other Ratios Investment to Total Assets (%) Net Liquid Capital Ratio (Calculated in accordance with the SEC’s rules)

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KIM ENG SECURITIES (THAILAND) PLC

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♦Report regarding the Responsibility of the Board of Directors for Financial Reports♦ ♦Annual Report 2007♦

Report regarding the Responsibility of the Board of Directors for Financial Reports The Board of Directors of Kim Eng Securities (Thailand) Plc. is responsible for the Company’s financial statements and financial information as shown in its annual report for the year 2007. The Company’s financial reports and information are prepared in compliance with the Generally Accepted Accounting Principles, with due care and carefulness. The Company has provided sufficient disclosure of important information in the notes to financial statements for the benefit of shareholders and general investors. For the purpose of preparing reliable and accurate financial statements and information, the Board of Directors has set up a risk management system to ensure accurate, complete and sufficient recording of accounting data for the purpose of asset custody and prevention of any fraud and unusual activities. As well, the Company set up an Audit Committee to review its accounting policies, sufficiency of the internal control systems, auditing and disclosure of financial data to ensure accurate, reliable and reasonable data regarding its financial status, revenue, expenses and cash flow. The Company’s financial statements were audited by Price, Waterhouse, Coopers ABAS Limited. In auditing the Company’s financial statements, the Board of Directors and the management provided data and documents necessary for the auditor to perform the auditing tasks and provide the opinion in accordance with applicable auditing standards. The auditor’s opinion already appears on the Company’s annual report. It is the Board of Directors’ opinion that the financial statements of Kim Eng Securities (Thailand) Plc. ending December 31, 2007 are prepared in line with generally accepted accounting principles and relevant rules and regulations.

(Yuth Vorachattarn) Chairman

(Montree Sornpaisarn) Chief Executive Officer

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KIM ENG SECURITIES (THAILAND) PLC

(Pusit Kaewmongkolsri) Chief Operating Officer

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♦Auditor’s Report and Financial Statements♦ ♦Annual Report 2007♦

KIM ENG SECURITIES (THAILAND) PUBLIC COMPANY LIMITED

CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 2007

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KIM ENG SECURITIES (THAILAND) PLC

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AUDITOR’S REPORT

To the Shareholders and the Board of Directors of Kim Eng Securities (Thailand) Public Company Limited

I have audited the accompanying consolidated and company balance sheets as at 31 December 2007 of Kim Eng Securities (Thailand) Public Company Limited and its subsidiary and of Kim Eng Securities (Thailand) Public Company Limited, respectively, and the related consolidated and company statements of income, changes in shareholders’ equity and cash flows for the year then ended 31 December 2007 and company balance sheet as at 31 December 2006, statements of income, changes in shareholders’ equity for the year ended 31 December 2006. The company’s management is responsible for the correctness and completeness of information in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated and company financial statements referred to above present fairly, in all material respects, the consolidated and company financial position as at 31 December 2007 and the consolidated and company results of operations, and cash flows for the year ended 31 December 2007 of Kim Eng Securities (Thailand) Public Company Limited and its subsidiary and of Kim Eng Securities (Thailand) Public Company Limited, respectively, and the company financial position as at 31 December 2006 and the company results of operations, and cash flow for the year ended 31 December 2006 in accordance with generally accepted accounting principles.

Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 PricewaterhouseCoopers ABAS Limited Bangkok 13 February 2008


Kim Eng Securities (Thailand) Public Company Limited Balance Sheets As at 31 December 2007 and 2006

Consolidated Notes

The company only

2007

2007

2006

Baht

Baht

Baht

Assets Cash and cash equivalents

3

2,131,883,037

2,107,843,130

2,543,841,032

Long-term deposits at financial institutions

4

2,487,974

2,487,974

12,979,295

Investments in debt and equity securities, net

5

395,154,187

395,154,187

422,331,523

Investments in subsidiary

6

-

24,999,983

-

Receivables from Clearing House

7

638,499,701

638,499,701

532,576,537

3,126,765,198

3,126,765,198

1,476,562,102

244,115,188

244,115,188

246,861,486

Securities and Derivatives business receivables

8, 9

Loans to employees under welfare program Equipment, net

10

121,533,942

121,533,942

147,547,312

Intangible assets

11

20,220,650

19,220,650

25,327,712

9,756,500

9,756,500

9,756,500

Deposits

40,592,732

40,592,732

37,343,982

Other assets

65,395,788

65,325,788

59,419,354

Total assets

6,796,404,897

6,796,294,973

5,514,546,835

Foreclosed properties

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Balance Sheets As at 31 December 2007 and 2006

Consolidated

The company only

2007

2007

2006

Baht

Baht

Baht

39,316,777

39,316,777

-

2,137,234,714

2,137,234,714

1,141,391,355

35,022,605

35,022,605

31,688,657

Accrued bonus expenses

218,695,379

218,695,379

175,017,357

Accrued corporate income tax

131,302,800

131,294,431

73,513,065

30,046,753

29,964,743

58,212,707

Notes Liabilities and shareholders’ equity Liabilities Payables to Clearing House Securities and Derivatives business payables Provisions

12

Accrued other expenses Liabilities under long-term lease

13

11,307,322

11,307,322

-

Dividend payable

17

909,604

909,604

899,184

Other liabilities

19,862,557

19,862,540

20,330,134

Total liabilities

2,623,698,511

2,623,608,115

1,501,052,459

2,861,250,000

2,861,250,000

2,861,250,000

2,781,808,500

2,781,808,500

2,740,435,500

494,777,529

494,777,529

478,144,729

281,000

281,000

72,000

180,633,241

180,633,241

153,065,287

715,206,116

715,186,588

641,776,860

4,172,706,386

4,172,686,858

4,013,494,376

6,796,404,897

6,796,294,973

5,514,546,835

Shareholders’ equity Share capital Authorised share capital 572,250,000 ordinary shares of Baht 5 each

14

Issued and paid-up share capital 556,361,700 ordinary shares of Baht 5 each (2006: 548,087,100 ordinary shares of Baht 5 each) Premium on share capital Share subscriptions received in advance Retained earnings Appropriated - Legal reserve

15

Unappropriated Total shareholders’ equity Total liabilities and shareholders’ equity

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Statements of Income As at 31 December 2007 and 2006

Consolidated

The company only

2007

2007

2006

Baht

Baht

Baht

1,618,629,848

1,618,629,848

1,645,147,386

89,543,900

89,543,900

15,597,200

24,635,434

24,635,434

62,061,574

Gain on trading in securities

6,913,993

6,913,993

2,916,165

Losses on trading in derivatives

(156,340)

(156,340)

(230,100)

Note Revenues Brokerage fees Brokerage fees from Securities Business Brokerage fees from Derivatives Business Fees and services income

Interest and dividend income

138,977,779

138,574,698

170,648,485

Interest on margin loans

62,380,958

62,380,958

47,316,107

Other income

30,636,779

30,636,779

26,949,689

1,971,562,351

1,971,159,270

1,970,406,506

Total revenues Expenses Expense on borrowings

36,316,447

36,316,447

26,967,895

Fees and services expenses

68,463,594

68,463,594

53,315,911

(11,180,511)

(11,180,511)

2,039,352

4,076,566

4,076,566

-

Personnel expenses

743,919,369

743,919,369

748,843,041

Premises and equipment expenses

244,224,083

244,223,756

275,171,587

6,847,923

6,834,411

7,930,980

39,819,208

39,819,208

34,213,746

101,174,162

100,812,817

105,821,773

1,233,660,841

1,233,285,657

1,254,304,285

Bad debts and doubtful accounts (reversal) Bad debts write off Operating expenses

Taxes and duties Directors' remuneration and others Other expenses Total expenses Profit before income tax

737,901,510

737,873,613

716,102,221

Income tax

186,522,896

186,514,527

183,302,945

Net profit for the year

551,378,614

551,359,086

532,799,276

Basic earnings per share (Baht)

19

1.00

1.00

0.98

Diluted earnings per share (Baht)

19

0.98

0.98

0.95

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2007 and 2006 Consolidated Issued and

Premium

paid-up

on share

Share subscriptions

Legal

Unappropriated retained

share capital

capital

received in advance

reserve

earnings

Total

Baht

Baht

Baht

Baht

Baht

Baht

2,740,435,500

478,144,729

72,000

153,065,287

641,776,860

4,013,494,376

Beginning balance at 1 January 2007 Net profit for the year Increase in share capital

-

-

-

-

551,378,614

551,378,614

41,373,000

16,632,800

209,000

-

-

58,214,800

-

-

-

27,567,954

(27,567,954)

-

-

-

-

-

(450,381,404)

(450,381,404)

2,781,808,500

494,777,529

281,000

180,633,241

715,206,116

4,172,706,386

Appropriation of legal reserve (Note 15) Dividends (Note 17)

Ending balance at 31 December 2007

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2007 and 2006

The company only Issued and

Premium

Unappropriated

paid-up

on share

Share subscriptions

Legal

retained

share capital

capital

received in advance

reserve

earnings

Total

Baht

Baht

Baht

Baht

Baht

Baht

2,740,435,500

478,144,729

72,000

153,065,287

641,776,860

4,013,494,376

-

-

-

-

551,359,086

551,359,086

41,373,000

16,632,800

209,000

-

-

58,214,800

-

-

-

27,567,954

(27,567,954)

-

-

-

-

-

(450,381,404)

(450,381,404)

2,781,808,500

494,777,529

281,000

180,633,241

715,186,588

4,172,686,858

Beginning balance at 1 January 2007 Net profit for the year Increase in share capital Appropriation of legal reserve (Note 15) Dividends (Note 17)

Ending balance at 31 December 2007

The company only Issued and

Premium

Unappropriated

paid-up

on share

Share subscriptions

Legal

retained

share capital

capital

received in advance

reserve

earnings

Total

Baht

Baht

Baht

Baht

Baht

Baht

2,725,000,000

471,941,729

-

126,425,323

724,217,548

4,047,584,600

-

-

-

-

532,799,276

532,799,276

15,435,500

6,203,000

72,000

-

-

21,710,500

-

-

-

26,639,964

(26,639,964)

-

-

-

-

-

(588,600,000)

(588,600,000)

2,740,435,500

478,144,729

72,000

153,065,287

641,776,860

4,013,494,376

Beginning balance at 1 January 2006 Net profit for the year Increase in share capital Appropriation of legal reserve (Note 15) Dividends (Note 17)

Ending balance at 31 December 2006

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Statements of Cash Flows For the years ended 31 December 2007 and 2006

Consolidated

The company only

2007

2007

2006

Baht

Baht

Baht

551,378,614

551,359,086

532,799,276

78,638,503

78,638,503

97,858,419

3,333,948

3,333,948

813,638

(11,180,511)

(11,180,511)

2,039,352

4,076,566

4,076,566

-

(7,989,888)

(7,989,888)

(1,540,555)

Gains on disposal of equipment

(424,466)

(424,466)

(95,460)

Amortisation of interest expenses financial lease

2,589,329

2,589,329

-

620,422,095

620,402,567

631,874,670

Long-term deposits at financial institutions

10,491,321

10,491,321

9,982,758

Short-term investments

35,583,884

35,583,884

(267,685,142)

(105,923,164)

(105,923,164)

(131,896,833)

(1,643,099,151) (1,643,099,151)

659,197,060

Cash flows from operating activities Net profit for the year Adjustments to reconcile net profit to cash (paid) provided by operating activities: Depreciation and amortisation Retirement benefit Bad debts and doubtful accounts (reversal) Bad debts write off Gains on revaluation of investments

Operating profit before changes in operating assets and liabilities (Increase) decrease in operating assets:

Receivables from Clearing House Securities and Derivatives business receivables Foreclosed assets

-

-

(2,300,000)

2,746,298

2,746,298

4,118,694

Deposits

(3,248,750)

(3,248,750)

(197,477)

Other assets

(5,976,434)

(5,906,434)

(2,009,033)

39,316,777

39,316,777

(50,002,580)

995,843,359

995,843,359

(650,673,605)

Accrued bonus expenses

43,678,022

43,678,022

(47,651,056)

Accrued corporate income tax

57,789,735

57,781,366

(16,497,052)

(28,186,923)

(28,268,933)

(10,437,464)

(467,577)

(467,594)

(4,784,846)

18,969,492

18,929,568

121,038,094

Loans to employees under welfare program

Increase (decrease) in operating liabilities: Payables to Clearing House Securities and Derivatives business payables

Accrued other expenses Other liabilities Net cash provided by operating activities

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Statements of Cash Flows For the years ended 31 December 2007 and 2006

Consolidated

The company only

2007

2007

2006

Baht

Baht

Baht

(31,225,416)

(31,225,416)

(40,636,566)

(3,349,342)

(2,349,342)

(9,467,010)

Cash paid for long - term investments

(416,660)

(416,660)

-

Proceeds from disposals of equipment

2,536,750

2,536,750

3,062,123

Cash paid for investment in subsidiary

-

(24,999,983)

-

Proceeds from long-term investments

-

-

579,083

(32,454,668)

(56,454,651)

(46,462,370)

Cash paid for financial lease

(6,316,635)

(6,316,635)

-

Increase in share capital

58,214,800

58,214,800

21,710,500

Dividend paid

(450,370,984)

(450,370,984)

(588,600,000)

Net cash used in financing activities

(398,472,819)

(398,472,819)

(566,889,500)

Net decrease in cash and cash equivalents

(411,957,995)

(435,997,902)

(492,313,776)

2,543,841,032

2,543,841,032

3,036,154,808

2,131,883,037

2,107,843,130

2,543,841,032

33,655,809

33,655,809

26,337,728

128,734,583

128,734,583

196,736,223

Cash flows from investing activities Purchases of equipment Purchases of intangible assets

Net cash used in investing activities Cash flows from financing activities

Cash and cash equivalents, at beginning of the year Cash and cash equivalents, at end of the year

Supplementary information for cash flows Interest paid Income tax paid Non cash items During the year ended 31 December 2007, the company had vehicles amounting to Baht 15.1 million under the long-term lease agreement.

The notes to financial statements on pages 61 to 81 form an integral part of these financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

1

General information

Kim Eng Securities (Thailand) Public Company Limited (“the company”) is a public limited company incorporated and resident in Thailand. The company is listed on the Stock Exchange of Thailand. The address of its registered office is as follows: 999/9 The Offices at Central World, 20th - 21st Floor, Rama I Road, Pathumwan, Bangkok, 10330. The company has 7 licenses for the securities business, which are brokering, trading, underwriting, investment advisory, corporate finance advisory, securities registrant, and TFEX license. As at 31 December 2007, the company employed 841 staff with 39 branches (As at 31 December 2006: 862 staff and 38 branches). These company financial statements have been approved for issuance by Board of Directors on 13 February 2008.

2

Accounting policies

The principal accounting policies adopted in the financial statements are set out below:

2.1

Basis of preparation The consolidated and company financial statements are prepared in accordance with the Thai generally accepted accounting principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Accounting Profession Act B.E. 2547, and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535. The consolidated and company financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The preparation of consolidated and company financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates. An English version of the consolidated and company financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail.

2.2

Amendment to publish standard effective for annual period beginning on 1 January 2007 and 2008 The following Thai Accounting Standards (“TAS”) are revised and are mandatory for accounting periods beginning on or after 1 January 2007. TAS 44 “Consolidated and Separate Financial Statements” (Revised 2006) TAS 45 “Investments in Associates ” (Revised 2006) TAS 46 “Interests in Joint Ventures” (Revised 2006) These accounting standards have no impact on the financial statements.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

2

Accounting policies (Cont’d)

2.2

Amendment to publish standard effective for annual period beginning on 1 January 2007 and 2008 (Cont’d) The following Thai Accounting Standards (“TAS”) are revised and are mandatory for accounting periods beginning on or after 1 January 2008 and have not been early adopted. TAS No. 25 TAS No. 29 TAS No. 31 TAS No. 33 TAS No. 35 TAS No. 39 TAS No. 41 TAS No. 43 TAS No. 49 TAS No. 51

“Cash Flow Statement” “Leases (revised 2007)” “Inventories” “Borrowing Costs” “Presentation of Financial Statement (revised 2007)” “Accounting Policies, Changes in Accounting Estimates and Errors (revised 2007)” “Interim Financial Reporting (revised 2007)” “Business Combinations” “Construction Contracts” “Intangible Assets”

The Company will apply these accounting standards for the accounting periods beginning on or after 1 January 2008. However, the Company’s management assessed and determined that the revised standards shall not impact significantly to the financial statements being presented.

2.3

Group Accounting - Investment in subsidiary Subsidiary is the entity over which the Group has the power to govern the financial and operating policies generally accompanying a shareholder of more than one half of the voting rights. Subsidiary is consolidated from the date on which control is transferred to the Group and is no longer consolidated from the date the control ceases. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. In the company’s separate financial statements, investment in subsidiary is reported by using the cost method less impairment, if any. These consolidated financial statements include the balance sheets as at 31 December 2007 and the related statements of income for the year ended 31 December 2007 of Kim Eng Securities (Thailand) Public Company Limited (“the Company”), the KEST Guardian Asset Management Ltd. (“the Subsidiary”), company registered under Thai law and engaged in managing a fund. The company started preparing the consolidated financial statements on 18 May 2007, when KEST Guardian Asset Management Ltd. registered the business with Minister of Commerce.

2.4

Income and expenses recognition General income and expenses are recognised on an accrual basis. Brokerage fees Brokerage income is recognised when the underlying transaction is contracted. Fees and service income Fees and service income are recognised as income when the service has been substantially rendered.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 2

Accounting policies (Cont’d) 2.4

Income and expenses recognition (Cont’d) Underwriting income Underwriting income is recognised as income when securities are allotted. Interest and dividend income Interest income from investments is recognised on a time proportion basis using the effective interest method. Dividend income from investments is recognised when the right to receive payment is established. Interest on credit balance transactions Interest on credit balance transaction is recognised as income on the time proportion basis except for interest income from certain securities business receivables, which is recognised on a collection basis in accordance with an announcement of the office of the Securities and Exchange Commission, dated 15 February 2001, regarding the accounting for sub-standard loans.

2.5

Cash and cash equivalents Cash and cash equivalents are carried on the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, current and saving deposits, negotiable certificates of deposits, promissory notes, and other short-term highly liquid investments with original maturing within 3 months or under. Bank overdrafts, if any, are included under borrowings in current liabilities on the balance sheet.

2.6

Investments in debt and equity securities Investments in available-for-sale and trading securities are presented at fair value less allowance for impairment (if any) in the balance sheet. Unrealised gains or losses resulting from changes in fair values of investment in available-for-sale securities and trading securities are included in the shareholders’ equity and in the statement of income, respectively. Fair value are calculated on the following basis: -

For debt securities, fair values, which are calculated by referencing to the last bid prices on the last business day of the year, are announced by the Thai Bond Market Association (Thai BMA). Fair values of other debt securities are calculated by referencing to the risk-free yield curve, adjusted by the appropriate risk premium.

-

For marketable equity securities, fair values are calculated by referencing to last bid prices quoted on the stock exchange on the last business day of the year.

Held-to-maturity debt securities are initially recognised at fair value plus transaction costs and subsequently accounted for at amortised cost using effective interest method, less allowance for impairment (if any). Investment in non-marketable equity securities is classified as general investment and is stated at cost, less allowance for impairment (if any). An impairment review is carried out when there is a factor indicating that such investment might be impaired. If the carrying amount of the investment is higher than its recoverable amount, impairment loss is charged to the statement of income. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income. When a particular investment in securities is partly disposed, the carrying amount of the disposed part is determined on the weighted average basis.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

2

Accounting policies (Cont’d)

2.7

Allowance for doubtful accounts Allowance for doubtful accounts is determined based on the conditions in announcement of the office of the Securities and Exchange Commission’s Notification dated 15 February 2001, regarding the accounting for sub-standard loans. The announcement requires the company to classify its loan portfolio into 3 categories subject to different levels of provisioning. The announcement also imposes policies regarding the collateral valuation for the purpose of setting allowance for doubtful accounts. Moreover, the considerations of the financial position of each debtor based on the experience and opinion of the management are also performed. Bad debts written off or bad debts recovered are recorded as a decrease or an increase in the allowance for doubtful accounts.

2.8

Equipment and depreciation Equipment is initially recorded at cost and is subsequently shown at cost less accumulated depreciation. Depreciation is calculated on the straight line method to write off the cost of each asset to its residual value over the estimated useful lives. Building improvement Furniture fixtures & equipment Motor vehicles

5 years 3 and 5 years 5 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Repairs and maintenance are charged to the income statement during the financial year in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovation is depreciated over the remaining useful life of the related asset. Repair and maintenance costs are recognised as an expense when incurred. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.

2.9

Foreclosed properties Foreclosed properties consist of immovable properties, which are stated at the lower of cost and recoverable amount. The excess of the carrying amount over recoverable amount is recognised as an impairment loss in statement of income. Gains or losses on disposals of such properties are recognised in the statement of income at the date of disposal.

2.10 Intangible assets Expenditure on acquired intangible assets is capitalised and amortised using the straight-line method over their useful lives, generally over 5 years. Intangible assets are not revalued. The carrying amount of each intangible asset is reviewed annually and adjusted for impairment where it is considered necessary.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

2

Accounting policies (Cont’d)

2.11 Financial instruments transactions Significant financial assets carried on the balance sheet include cash and cash equivalents, long-term deposits at financial institutions, investments in debt securities, Receivables from Clearing House, Securities and Derivatives business receivable, and loans to employees under welfare program. Significant financial liabilities carried on the balance sheet include Payables to Clearing House, Securities and Derivatives business payables. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The company does not trade or speculate in any financial instruments. The company is not party to other financial instruments, which are not recognised in the financial statements.

2.12 Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

2.13 Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when it is virtually certain.

2.14 Provident fund The company established a contributory registered provident fund for those employees who indicate their willingness to join, in accordance with the Provident Fund Act B.E. 2530. The company operates a provident fund that the asset for which are held in a separate trustee-administered fund managed by independent fund manager. The provident fund is funded by payments from employees at the amount equal to 2% - 3% of the employees’ basic salary and by the company at the amount equal to 2% - 8% of the employees’ basic salary depending on years of services. The contributions to the provident fund are charged to the statement of income in the year to which they relate.

2.15 Employee Benefits The company provides for post employment benefits, payable to employees under Thai labour law. The amount payable in the future depends on the salary and years of services of the respective employees. The liability arising as a result of Thai labour law recorded as the present value of estimated future cash outflows using interest rates which have terms to maturities approximating the terms of the related liabilities.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 2

Accounting policies (Cont’d) 2.16 Earnings (loss) per share The basic earnings per share amount is computed by dividing the net income (loss) for year by the weighted-average number of paid-up ordinary shares in issue during the year. Diluted earnings per share is calculated by dividing net income (loss) for the year by the sum of weighted average number of ordinary share to be issued for conversion of all dilutive potential ordinary shares into ordinary shares. The calculation assumes that conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued.

2.17 Operating leases - where the company is the lessee Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payment made under operating lease (net of any incentives received from the lessor) is charged to the statement of income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

2.18 Leases - where a Company is the lessee Leases of vehicles, which substantially transfer all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. The vehicle under finance leases is depreciated over the life of the asset.

3

Cash and cash equivalents Consolidated 31 December 2007 Baht Cash on hand Current and saving deposits Promissory notes with remaining maturity less than 3 months Less Deposits on behalf of customers Total cash and cash equivalents

362,000 501,423,131

The company only 31 December 31 December 2007 2006 Baht Baht 362,000 501,283,224

421,178 277,302,344

3,178,900,000 3,155,000,000 (1,548,802,094) (1,548,802,094)

3,190,000,000 (923,882,490)

2,107,843,130

2,543,841,032

2,131,883,037

The company’s deposits on behalf of customers relate to cash deposited by customers, which the company has the obligation to repay to the customers on demand. In accordance with notification No. Sor Thor 44/2543 dated 12 September 2000, issued by the Office of the Securities and Exchange Commission, this amount was excluded from cash and cash equivalents held by the company. As at 31 December 2007, deposits on behalf of customers include amount due to Kim Eng Securities Pte Ltd. of Baht 0.05 million (As at 31 December 2006, deposits on behalf of customers include amount due to Kim Eng Securities Pte Ltd. Baht 0.17 million).

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

3

Long-term deposits at financial institutions Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Fixed deposit Restricted cash

1,131,042 1,356,932

1,131,042 1,356,932

10,380,323 2,598,972

Total long-term deposits at financial institutions

2,487,974

2,487,974

12,979,295

As at 31 December 2007, fixed deposits of Baht 1 million (31 December 2006: Baht 3 million) are pledged as collateral to local banks for letter of guarantees.

4

Investments in debt and equity securities, net Consolidated 31 December 2007 Cost/ Amortised cost Fair value Baht Baht Short-term investments Trading equity securities Trading unit trust Trading debts securities

969,390 360,000,000 -

1,334,422 368,280,048 -

Total Less Revaluation adjustments

360,969,390 8,645,080

369,614,470 -

Total short-term investments - net

369,614,470

369,614,470

Long-term investments General investments Held-to-maturity debt securities

23,991,160 1,548,557

43,861,171 1,548,557

Total long-term investments - net

25,539,717

45,409,728

395,154,187

415,024,198

Total investments in debt and equity securities

As at 31 December 2007, the Company has investments in equity, which is used as collateral in court, amounting to Baht 7,622,000 (31 December 2007: Baht 7,622,000).

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

5

Investments in debt and equity securities, net (Cont’d) The company only The company only 31 December 2006 31 December 2007 Cost/ Cost/ Amortised cost Fair value Amortised cost Fair value Baht Baht Baht Baht Short-term investments Trading equity securities Trading unit trust Trading debts securities

969,390 360,000,000 -

1,334,422 368,280,048 -

33,503,274 320,000,000 43,050,000

33,461,289 321,088,733 42,658,444

Total Less Revaluation adjustments

360,969,390 8,645,080

369,614,470 -

396,553,274 655,192

397,208,466 -

Total short-term investments - net

369,614,470

369,614,470

397,208,466

397,208,466

Long-term investments General investments Held-to-maturity debt securities

23,991,160 1,548,557

43,861,171 1,548,557

23,574,500 1,548,557

27,824,923 1,548,557

Total long-term investments - net

25,539,717

45,409,728

25,123,057

29,373,480

395,154,187

415,024,198

422,331,523

426,581,946

Total investments in debt and equity securities

As at 31 December 2007, the Company has investments in equity, which is used as collateral in court, amounting to Baht 7,622,000 (31 December 2007: Baht 7,622,000). Cost and amortised cost of debt securities according to their maturities. At 31 December 2007 1 Held-to-maturity debt securities

Consolidated and the company only Mature within (year) 2-5 6 - 10 1,548,577

-

-

-

1,548,577

-

-

The company only Mature within (year) 2-5 6 - 10

1

Pages 68

over 10

-

At 31 December 2006

Held-to-maturity debt securities

(Baht)

(Baht) over 10

-

1,548,577

-

-

-

1,548,577

-

-

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 5

Investment in subsidiary The company investment in a subsidiary, which is a company registered under Thai laws and operating in Thailand, as of 31 December 2007 is summarised below: Name of Company KEST Guardian Asset Management Ltd.

6

Type of business Asset management

Type of relationship Subsidiary

Paid-up share capital Million Baht

% of holding

25

99.99

25

Receivables from Clearing House Consolidated 2007 Baht Receivables from Thai Securities Depositing Co., Ltd. (TSD) Receivables from Thai Clearing House Co., Ltd (TCH) Less Receivables from Clearing House on behalf of customers

7

Investment Cost method Million Baht

The company only 2007 2006 Baht Baht

638,499,701

638,499,701

532,576,237

86,815,740

86,815,740

26,610,000

(86,815,740)

(86,815,740)

(26,609,700)

638,499,701

638,499,701

532,576,537

Securities and Derivatives business receivables Balance of Securities business receivable as at 31 December 2007 and 2006 are as follows: Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Customers’ cash accounts Credit balance transactions Other receivables

1,417,006,353 1,693,949,013 280,405,376

1,417,006,353 1,693,949,013 280,405,376

755,779,289 713,785,727 290,898,758

Total securities business receivables Add Accrued interest receivables Less Allowance for doubtful accounts (Note 9)

3,391,360,742 25,848,434 (298,492,438)

3,391,360,742 25,848,434 (298,492,438)

1,760,463,774 23,688,114 (309,527,130)

Net securities business receivables and accrued interest receivables

3,118,716,738

3,118,716,738

1,474,624,758

As at 31 December 2007, the company had loans and receivables totalling approximately Baht 299 million (31 December 2006: Baht 310 million) for which recognition of interest income had been discontinued in accordance with the Office of the Securities and Exchange Commission’s notification dated 15 February 2001. Balance of Derivatives business receivables as at 31 December 2007 and 2006 are as follows: Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Derivative business receivables Less Allowance for doubtful accounts (Note 9)

8,048,460 -

8,048,460 -

2,083,163 (145,819)

Derivative business receivables, net

8,048,460

8,048,460

1,937,344

3,126,765,198

3,126,765,198

1,476,562,102

Total

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 8

Securities and Derivatives business receivables (Cont’d) The company has classified Securities and Derivatives business receivables in accordance with the notification of the Office of the Securities and Exchange Commission dated 15 February 2001, regarding the accounting for sub-standard loans as follows:

Classifications

Consolidated and the company only 31 December 2007 Allowance for doubtful accounts Total debts Amount set up Amount required (including accrued by the interest receivables) company by SEC Million Baht Million Baht Million Baht

Normal debts Substandard debts Doubtful debts

3,126.67 15.67 282.92

15.57 282.92

282.92

Total

3,425.26

298.49

282.92

Classifications

The company only 31 December 2006 Allowance for doubtful accounts Total debts Amount set up Amount required (including accrued by the interest receivables) company by SEC Million Baht Million Baht Million Baht

Normal debts Substandard debts Doubtful debts

1,476.08 16.93 293.23

16.44 293.23

293.23

Total

1,786.24

309.67

293.23

The company had set up an allowance for doubtful debts based on the receivables classification at a rate higher than the minimum rate as suggested by the Office of the Securities and Exchange Commission of Thailand, and also by reviewing the individual debtor’s repayment ability, taking into consideration the recovery risk and the value of the collateral. The substandard and doubtful debts (receivables and accrued interest receivables) are classified by aging as follows: Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Up to 3 months Over 3 months to 6 months Over 6 months to 9 months Over 9 months to 12 months Over 1 year to 3 years Over 3 years

0.06 0.07 1.16 297.30

0.06 0.07 1.16 297.30

0.47 6.20 0.02 0.74 302.73

Total

298.59

298.59

310.16

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 8

Allowance for doubtful accounts Consolidated 31 December 2007 Baht

9

The company only 31 December 31 December 2007 2006 Baht Baht

Beginning balance of the year Add Doubtful accounts Less Bad debt written-off Reversal of doubtful accounts

309,672,949 173,481 (4,603,120) (6,750,872)

309,672,949 173,481 (4,603,120) (6,750,872)

307,633,597 6,444,717 (4,405,365)

Ending balance of the year

298,492,438

298,492,438

309,672,949

Equipment, net

Building improvement Baht

At 31 December 2006 Cost Less Accumulated depreciation

Net book amount For the year ended 31 December 2007 Opening net book amount Additions Transfer Disposals, net Depreciation charge Net book amount At 31 December 2007 Cost Less Accumulated depreciation Net book amount

Consolidated and the company only Furniture fixtures & Motor Financial Construction equipment vehicles lease in progress Baht Baht Baht Baht

Total Baht

197,106,161

388,699,284

576,409

-

-

586,381,854

(126,338,789)

(312,482,811)

(12,942)

-

- (438,834,542)

70,767,372

76,216,473

563,467

-

-

147,547,312

70,767,372 4,491,556 6,661,020 (1,370,478) (22,301,742)

76,216,473 19,382,952 392,365 (108,234) (42,490,450)

563,467 (273,368) (65,975)

15,055,597 (360,204) (5,323,932)

7,350,908 (7,053,385) -

147,547,312 46,281,013 (2,112,284) (70,182,099)

58,247,728

53,393,106

224,124

9,371,461

297,523

121,533,942

206,424,064

401,392,359

288,205

14,583,026

297,523

622,985,177

(148,176,336)

(347,999,253)

(64,081)

(5,211,565)

58,247,728

53,393,106

224,124

9,371,461

- (501,452,235) 297,523

121,533,942

Initial cost of assets, which have already been fully depreciated as at 31 December 2007, is Baht 357 million. The balance consists of building improvements, Baht 92 million, furniture & fixtures, Baht 50 million, and computers, Baht 215 million.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 10 Intangible assets

Beginning balance Baht

Consolidated For the year ended 31 December 2007 Transfer Amortised Addition in/out amount Baht Baht Baht

Computer software Software under installation TFEX member fee Mutual fund license

18,743,772 2,263,392 4,320,548 -

1,186,842 1,162,500 1,000,000

1,541,574 (1,541,574) -

(7,456,404) (1,000,000) -

14,015,784 1,884,318 3,320,548 1,000,000

Total

25,327,712

3,349,342

-

(8,456,404)

20,220,650

Beginning balance Baht

The company Only For the year ended 31 December 2007 Transfer Amortised Addition in/out amount Baht Baht Baht

Ending balance Baht

Computer software Software under installation TFEX member fee

18,743,772 2,263,392 4,320,548

1,186,842 1,162,500 -

1,541,574 (1,541,574) -

(7,456,404) (1,000,000)

14,015,784 1,884,318 3,320,548

Total

25,327,712

2,349,342

-

8,456,404

19,220,650

Ending balance Baht

Initial cost of computer software, which has already fully depreciated as at 31 December 2007, is Baht 38 million. The company only For the year ended 31 December 2006 Beginning Amortised balance Increase amount Baht Baht Baht

Ending balance Baht

Computer software Software under installation TFEX member fee

25,330,831 -

2,203,618 2,263,392 5,000,000

(8,790,677) (679,452)

18,743,772 2,263,392 4,320,548

Total

25,330,831

9,467,010

(9,470,129)

25,327,712

11 Provisions Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Opening balance Increase during the year

31,688,657 3,333,948

31,688,657 3,333,948

30,875,019 813,638

Closing balance

35,022,605

35,022,605

31,688,657

As at 31 December 2007 and 2006, the provision comprised the obligations of the company to Nithipat Capital Public Co., Ltd., (“Nithipat”), the former parent company, of approximately Baht 10.63 million in case that Nithipat cannot collect their securities debts which have not been transferred as mentioned in the Asset Transfer Letter dated 14 August 1996. Additional provision is set up for the notification of approximately Baht 15.70 million from a customers’ account of Yuanta Securities (Thailand) Limited demanding the company to pay for damage claims from the event occurred before the customer were transferred to the company.

As at 31 December 2007 the company has post employment benefits, payable to employees under the Thai labor law for Baht 9 million (31 December 2006: Baht 5 million).

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 12 Liabilities under long-term lease Liabilities under long-term lease contracts represent finance lease for vehicles. The balance as at 31 December 2007 and 2006 comprise;

Consolidated 31 December 2007 Baht Minimum lease payments obligation under long-term lease contracts Less Deferred interest

Current portion due within one year Portion due after one year

The company only 31 December 31 December 2007 2006 Baht Baht

12,660,444 (1,353,122)

12,660,444 (1,353,122)

-

11,307,322

11,307,322

-

5,150,085 6,157,237

5,150,085 6,157,237

-

11,307,322

11,307,322

-

13 Capital share On 6 December 2005, the shareholders at the Extraordinary Meeting passed a resolution to approve to following: -

Decrease of authorised share capital, reserved for public offering, from 560 million ordinary shares with a par value of Baht 5 per share to 545 million ordinary shares with a par value of Baht 5 per share. The company registered the decrease share capital with the Ministry of Commerce on 9 December 2005.

-

Increase of authorised share capital, reserved for the exercise of employee stock option issued for director and/or staff, from 545 million ordinary shares with a par value of Baht 5 per share to 572.25 million ordinary shares with a par value of Baht 5 per share. The company registered the increase share capital with the Ministry of Commerce on 13 December 2005.

During the year ended 31 December 2007, the warrant holders exercise their own rights, then the issued share capital increase for 8,274,600 shares. 14 Legal reserve Consolidated 31 December 2007 Baht

The company only 31 December 31 December 2007 2006 Baht Baht

Opening balance Appropriation during the year

153,065,287 27,567,954

153,065,287 27,567,954

126,425,323 26,639,964

Closing balance

180,633,241

180,633,241

153,065,287

Under the Public Companies Act B.E. 2535, the company is required to set aside as a legal reserve at least 5% of its net income after accumulated deficit brought forward (if any) until the reserve is not less than 10% of the registered share capital. The reserve is non-distributable as dividends.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

15 Warrants

On 6 December 2005, the shareholders at an Extraordinary General Meeting of Shareholders approved the issuance of warrants to purchase the Company’s ordinary shares to its directors and/or staff at the maximum of 27.25 million units, free of charge. The exercise price of warrant is Baht 7 per share and they are exercisable in a ratio of 1 warrant to 1 ordinary share. The exercise date is at the last working day of each month throughout the 4 years term of warrants. The first exercisable date will be on 31 August 2006. During the year ended 2007, the warrants were exercised amounting to 8,316,400 units. As at 31 December 2007, the outstanding warrants, which have been allotted but not exercised, are 15,832,100 units.

16 Dividends

An interim dividend of Baht 0.20 per share amounting to a total of Baht 110.54 million was approved at the Board of Director’s Meeting on 8 August 2007. The dividend was paid on 31 August 2007. A dividend of Baht 0.62 per share amounting to a total of Baht 339.84 million was approved at the Ordinary Shareholding’s Meeting on 20 March 2007. The dividend was paid on 2 April 2007. An interim dividend of Baht 0.25 per share amounting to a total of Baht 136.25 million was approved at the Board of Director’s Meeting on 10 August 2006. The dividend was paid on 1 September 2006. A dividend of Baht 0.83 per share amounting to a total of Baht 452.35 million was approved at the Ordinary Shareholder’s Meeting on 5 April 2006. The dividend was paid on 24 April 2006.

17 Provident fund

For the year ended 31 December 2007, the company’s contribution was amounting to Baht 17,116,004 (31 December 2006: Baht 16,765,819).

18 Reconciliation of dilutive earnings per share Consolidated For the year ended 31 December 2007 Weighted average number of Earnings Net earning ordinary share per share Baht Baht Baht Basic earnings per share Net profit for the year Effect of diluted potential ordinary shares Warrants Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares

Pages 74

551,378,614

552,654,222

1.00

-

10,671,042

(0.02)

551,378,614

563,325,264

0.98

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 19 Reconciliation of dilutive earnings per share (Cont’d)

Net earning 2007 Baht Basic earnings per share Net profit for the years Effect of diluted potential ordinary shares Warrants Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares

The company only For the year ended 31 December Weighted average number of ordinary share 2006 2007 2006 Baht Shares Shares

Earnings per share 2007 2006 Baht Baht

551,359,086

532,799,276

552,654,222

545,986,302

1.00

0.98

-

-

10,671,042

14,305,589

(0.02)

(0.03)

551,359,086

532,799,276

563,325,264

560,291,891

0.98

0.95

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 19 Financial instruments Interest rate risk Interest rate risk is the exposure to the risk associated with the effects of fluctuations in prevailing levels of market interest rates on the Company’ s financial instruments. As at 31 December 2007, the outstanding balances of financial statements classified by type of interest rate are as follows: Million Baht Consolidated Fixed interest rate

Non

Remaining period before maturity

Without

performing

date or repricing date

interest

debts

Floating

Less than

interest rates

1 year

1,472

Total

Interest rate (%)

Over 5

Floating

Fixed

1 – 5 years

years

interest rate

interest rate

250

-

-

410

-

2,132

0.125 - 3.25

2.75

-

2 -

-

-

638

2 -

2 2 638

-

2.00 - 2.25 -

1,694

-

-

-

1,425

280

3,399

5.75 - 6.00

-

244

-

-

-

-

-

244

2.33

-

3,410

252

-

-

2,473

282

6,417

-

5

6

-

39 2,137 -

-

39 2,137 11

-

-

-

5

6

-

2,176

-

2,187

-

-

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing Hourse Securities business payables Liabilities under long-term lease Total

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 20 Financial instruments (Cont’d)

Interest rate risk (Cont’d) Million Baht The company only Non

Fixed interest rate Remaining period before maturity

Without

performing

date or repricing date

interest

debts

Floating

Less than

interest rates

1 year

1,448

Total

Interest rate (%)

Over 5

Floating

Fixed

1 - 5 years

years

interest rate

interest rate

250

-

-

410

-

2,108

0.125 - 3.25

2.75

-

2 -

-

-

638

2 -

2 2 638

-

2.00 - 2.25 -

1,694

-

-

-

1,425

280

3,399

5.75 - 6.00

-

244

-

-

-

-

-

244

2.33

-

3,386

252

-

-

2,473

282

6,393

-

5

6

-

39 2,137 -

-

39 2,137 11

-

-

-

5

6

-

2,176

-

2,187

-

-

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities business payables Liabilities under long-term lease Total

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 20 Financial instruments (Cont’d) Credit risk

Credit risk is the exposure to the risk that the counterparties might discharge their obligations, which could cause the company to incur financial loss. The main financial assets that potentially subject to the company to credit risk are securities business receivables and accrued interest receivables. The risk is managed by setting up appropriate credit limits and terms, which are granted to each type of customer.

Liquidity risk

The maturity dates of financial instruments held as of 31 December 2007, counting from the balance sheet date, are as follows:

Million Baht Consolidated Non Within

Over 5

performing

At call

1 year

1 - 5 years

years

debts

Total

1,882

250

-

-

-

2,132

-

2

-

-

-

2

-

-

-

-

2

2

-

638

-

-

-

638

1,694

1,425

-

-

280

3,399

-

29

84

131

-

244

3,576

2,344

84

131

282

6,417

-

39 2,137 5

6

-

-

39 2,137 11

-

2,181

6

-

-

2,187

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities business payables Liabilities under long-term lease Total

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 20 Financial instruments (Cont’d) Million Baht The company only Non Within

Over 5

performing

At call

1 year

1 - 5 years

years

debts

Total

1,858

250

-

-

-

2,108

-

2

-

-

-

2

-

-

-

-

2

2

-

638

-

-

-

638

1,694

1,425

-

-

280

3,399

-

29

84

131

-

244

3,552

2,344

84

131

282

6,393

Payable to Clearing House

-

39

-

-

-

39

Securities business payables Liabilities under long-term lease

-

2,137 5

6

-

-

2,137 11

-

2,181

6

-

-

2,187

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities

Total

Fair value The management believes that the fair value of the company’s financial assets and liabilities does not materially differ from their carrying value. 20 Related party transactions Information with respect to related parties is as follows:

Nature of relationship Kim Eng Holdings Limited Yuanta Securities Asia Financial Service Limited Kim Eng Securities Pte Ltd. KEST Guardian Asset Management Company Limited

Pages 79

Parent company Shareholding in the parent company Fellow subsidiary Subsidiary

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006

21 Related party transactions (Cont’d) During the years ended 31 December 2007 and 2006, the Company had significant business transactions with related companies. These transactions can be summarised as follow: The company only Consolidated 31 December 31 December 31 December 2007 2007 2006 Million Baht Million Baht Million Baht

Transfer price policies

Brokerage fee income - Kim Eng Securities Pte Ltd. - Kim Eng Holding Limited

246 -

246 -

329 At minimum rate set by the 1 Stock Exchange of Thailand

Information technology service expenses - Kim Eng Holdings Limited

3

3

3 At the price agreed upon by both parties referencing the market price.

259

259

341

25

25

-

Dividends - Kim Eng Holdings Limited Cash paid for investing - KEST Guardian Asset Management Company Limited

The outstanding balances of the above transactions, as presented in the balance sheets are as follows: Consolidated

The company only

31 December 2007 Million Baht

31 December 2007 Million Baht

31 December 2006 Million Baht

290

290

1

20

20

150

Securities business receivables - Kim Eng Securities Pte Ltd. Securities business payables - Kim Eng Securities Pte Ltd.

As at 31 December 2007, the company has provided loans amounting to approximately Baht 3 million (31 December 2006: Baht 7 million) to employees under the definition of the Securities and Exchange Commission. Interest is charged at the rate charged to other employees under the same scheme. On 1 July 2003, the company signed the information technology service agreement with the parent company for a period of 1.5 years and has been committed to pay fee at the rate specified in the agreement. If no termination is made by either party when due, the agreement is automatically renewed for another year. As at 31 December 2007, Kim Eng Holding Ltd. guaranteed the overdraft facilities amounting to Baht 300 million, however, such facilities have not been utilised by the Company yet.

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Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2007 and 2006 22

Operating lease commitment The Company entered into the long-term lease agreements for office and services and motor vehicles. The future aggregate minimum lease payments under these agreements are as follows: Consolidated

No later than 1 year Later than 1 year but not later than 2 years Later than 2 years Total

23

The company only

31 December

31 December

31 December

2007 Million Baht

2007 Million Baht

2006 Million Baht

70 47 37

70 47 37

70 29 8

154

154

107

Business/geographical segment information

The company’s operation involves mainly in Securities brokering and service provision and is operated only in Thailand, accordingly, no business/geographical area segment information is presented.

Pages 81

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Mbket 07  

MBKET_2007 MAYBANK KIM ENG SECURITIES (THAILAND) PCL Annual Report 2007